Infra Play #112: xAI
xAI is an AI company with the mission of advancing scientific discovery and gaining a deeper understanding of our universe. It’s also being occupied by the playbook mafia.
It’s difficult to overstate what a massive revenue jump we saw in the last year across the frontier labs. In this newsletter, you’ve read deep dives on many companies with amazing businesses and highly impactful solutions. Most of them took significant time to build and reach those impressive growth numbers. For example, Crowdstrike, one of the most impactful cybersecurity companies in the world, was founded in 2011 and recently reached $3.9 billion in revenue. OpenAI has four times the revenue and only started selling a product two years ago.
As such, it’s clear that the frontier labs hold a massive growth opportunity for AI-native sales reps and should be at the top of your priority list whenever they are hiring in your region. Today we will cover xAI, the biggest wildcard in the industry.
The key takeaway
For tech sales: xAI has had a chaotic year, making significant progress on product and infrastructure while bungling their hiring process, signaling that Elon Musk has far less control over this area than at his previous companies. He hasn’t hired or managed a software sales team since the early 2000s, so one of the investors has been “helping.” Currently, your odds of getting hired are minimal unless you come from a playbook company and have personal connections with the VC driving the hiring process. Since they are currently burning $1B monthly and will be lucky to get to $500M ARR by the end of the year, it’s difficult not to see this wave of hiring as anything but pigs to get slaughtered, while the cleanup crew gets all the spoils.
For investors: The value proposition of xAI depends on whether AI is a high-variance, power-law game or a low-variance, bell-curve one. If all frontier labs benefit from a massive adoption cycle, xAI has positioned itself to capture value. Taking a long-term view toward AGI, the future looks murkier. They’ve had their source code stolen, key researchers remain poaching targets, Grok 4 Fast is their first potentially competitive product, and the company is massively leveraged and under pressure to deliver wins. On the plus side, outside of DeepMind, they’re the only player with their own infrastructure (for now) and they have Elon Musk highly committed to reaching AGI. A lot rides on Grok 5 and whether they can pull off a “Claude Code” moment. Typically, xAI would be considered a contrarian bet, but based on the current dynamics there are way too many pain points that need urgent attention, while they are going against multiple heavily funded organizations that are executing at a higher level in almost every category. The bear thesis here is that they need other players in the ecosystem to help them drive adoption, and none of them has the incentive to do so.
xAI and Elon Musk
Subject: question
Sam Altman to Elon Musk - May 25, 2015 9:10 PM
Been thinking a lot about whether it’s possible to stop humanity from developing AI.
I think the answer is almost definitely not.
If it’s going to happen anyway, it seems like it would be good for someone other than Google to do it first.
Any thoughts on whether it would be good for YC to start a Manhattan Project for AI? My sense is we could get many of the top ~50 to work on it, and we could structure it so that the tech belongs to the world via some sort of nonprofit but the people working on it get startup-like compensation if it works. Obviously we’d comply with/aggressively support all regulation.
Sam
Elon Musk to Sam Altman - May 25, 2015 11:09 PM
Probably worth a conversation
It’s critical to understand that the frontier labs operating today are the reflection of a generation of researchers and influential (and often very wealthy) insiders who have been working in this direction for a while. xAI is an extension of Elon’s vision for AI, something he’s believed in for a while and supported where he could while building out his companies.