xAI: Musk’s meteoric millions
For a company that was launched only in 2023, Elon Musk’s xAI is seeing its valuation rocketing at rates that would strike a chord with fans of the headier days of the Weimar Republic. Its series B fundraising in May 2024 valued the company at $18bn, which starts to look a bit more like a tip than an investment compared with the range of $170bn-$200bn that it’s reported to be looking for in its latest round.
You clearly need a big chequebook to play at this level, and that certainly applies to the Public Investment Fund, the Saudi Arabian sovereign wealth fund that has already invested $800m in xAI via its Kingdom Holding Co.
xAI is not the only arrow in Musk’s quiver whose valuation is heading for the stratosphere, with SpaceX reported to be seeking to raise $1bn at a valuation of $400bn. This is despite the punch-up between Musk and his former best bud US President Donald Trump, which some had thought might lead to problems with its government contracts.
xAI is not without controversy, with its chatbot, Grok, taking Musk’s admiration for radical free speech a bit further than intended, including showing an alarming propensity to recommend Hitler as a leader who got problems solved. This will clearly not help X to win back the advertisers that have become increasingly wary of the lack of content moderation, not to mention the possibility that this sort of content may prove to be illegal in the EU. For Musk, it’s a blip en route to global domination.
WPP: AI angst in adland
There’s wailing and gnashing of teeth all over adland as the advertising industry struggles to get to grips with the reality of quite how harmful AI might be to its legacy business model.
WPP was transformed from a maker of wire supermarket baskets into the world’s biggest advertising company by revenue by Sir Martin Sorrell, who was at the helm until he was spotted by a couple of his employees entering the premises of a professional who was most definitely not a lawyer, and had to bid the company a hasty farewell.
The company’s share price has more than halved since Sorrell left in 2018, and its underperformance against its major rival, Publicis, is striking.
Sorrell’s successor as CEO, Mark Read, has been credited for simplifying the structure of an organisation that was all over the place, with its own agencies competing against each other for client mandates, and for investing in AI tools that will simplify the process of making ads, but he has now been replaced by Cindy Rose, previously the COO for global enterprise at Microsoft.
She has a challenge on her hands, given that expectations are that 75% of the growth in global advertising this year will be in digital, which is dominated by the tech giants rather than the traditional agencies.
The company’s share price dropped by 15% after it issued a warning that like-for-like revenue would drop by 3%-5% in 2025, with a challenging macroeconomic backdrop and the chaos of ever-changing US tariff threats encouraging its clients to keep their hands in their pockets.
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