xAI projects $13 billion in annual EBITDA by 2029 as revenue ramps, despite early losses.

The generative AI startup founded by Elon Musk reported $52 million in Q1 gross revenue and a $341 million EBITDA loss, per Bloomberg citing Morgan Stanley presentation.

Revenue is forecast at $1 billion in 2025, $14 billion by 2029, while EBITDA is seen at $2.7 billion in 2027 and $13.1 billion in 2029. The bulk of spending$2.6 billion so farhas gone into data centers, with future data center capital expenditures expected to total $18 billion.

Even after losing $220 million in operating cash flow in Q1, xAI's valuation soared following a $6 billion capital raise late last year that pegged its worth at $50 billion; a March acquisition of Musk's X social network drove its valuation to $113 billion. The Memphis data center, powered by 100,000 Nvidia (NASDAQ:NVDA) H100 GPUs, underpins operations.

Plans for a $300 million share sale could provide fresh liquidity. Musk, who also oversees Tesla (NASDAQ:TSLA), had floated a $5 billion Tesla investment into xAI after internet polls favored the idea.

Investors should care because xAI's ballooning cost structuredriven by massive data center buildoutsputs pressure on margins even as revenue forecasts accelerate.

The company's valuation metrics hinge on hitting aggressive 2027 and 2029 EBITDA targets, and any delay in scaling could dampen Musk's broader AI ambitions and indirectly affect Tesla's AI roadmap, given Musk's dual leadership.

As competition intensifies from big players like OpenAI and Google, xAI must translate its capital into sustainable growth amid capital-intensive headwinds.

Investors will watch for updates on xAI's share sale, data center completion timelines, and any profit guidance revisions when Morgan Stanley or other bankers release updated projections later this year.

This article first appeared on GuruFocus.