Fidelity marks up the value of its holdings in Elon Musk's X by 32.37% in October

Fidelity Investments has given a notable boost to its valuation of X Holdings, the company owned by Elon Musk. In October, Fidelity marked up its holdings in X by an impressive 32.37 per cent.

This makes it the largest increase since the company’s high-profile acquisition in 2022, as per a report by Axios. Despite this surge, Fidelity still considers X to be worth substantially less than the $44 billion Musk initially paid for it, valuing the platform at nearly 72 per cent below its original purchase price.

This change in valuation raises eyebrows, particularly because similar tech firms like Meta and Snap didn’t enjoy such gains during the same period. In fact, Meta saw its value dip slightly, making X’s sudden spike stand out even more.

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What’s happening behind the scenes?

Fidelity’s valuation process remains somewhat of a mystery, as the company doesn’t share details about how it assesses the worth of private firms like X. It’s also important to note that Fidelity’s decisions aren’t necessarily rooted in insider information about X’s actual financial performance, even though it holds a stake in the company.

This valuation jump has sparked curiosity, especially because it comes at a time when comparable companies in the social media space haven’t shown similar growth. Some observers speculate that the rise could have little to do with X itself and more to do with other ventures connected to Musk.

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A closer look at xAI’s role

One potential factor driving the change is xAI, Musk’s separate artificial intelligence venture, which is heavily reliant on X’s data to train its large language model. Fidelity was part of a $6 billion Series B funding round for xAI and held its shares at cost for months before marking them up by around 70% in October.

Reports suggest that X Holdings, which oversees X, may hold a significant equity stake in xAI. If true, this connection could explain why Fidelity increased its valuation of X Holdings, as xAI’s rising worth would naturally boost its related entities.

Timing and other factors

It’s worth noting that Fidelity’s valuation updates operate on a one-month lag, so this particular mark-up doesn’t yet account for more recent developments, such as the re-election of Donald Trump or Musk’s rumoured advisory role in the administration.  

As these events unfold, they could further influence how X and its associated ventures are valued. For now, the October bump remains a significant development in the ongoing story of Musk’s X.