Regulatory Risks of Deepfakes in the AI Industry and Investment Value Analysis of Musk-affiliated Companies

Based on the above data collection and analysis, we now present a comprehensive investment research report.

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On January 15, 2026, the Office of the Privacy Commissioner of Canada (OPC) announced the launch of a formal investigation into xAI, a company owned by Elon Musk, and its social media platform X [1][2][3]. The direct trigger for the investigation is the widespread use of the Grok chatbot to generate sexualized deepfake content without the consent of the individuals involved. This investigation marks Canada as the latest jurisdiction to take regulatory action against AI-generated deepfake content.

The core issues of the investigation include:

• Compliance Review
  : Assess whether xAI and X are in compliance with Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA) [3]
• Informed Consent Issue
  : Investigate whether the two companies have effectively obtained personal consent for the collection, use, and disclosure of personal information to create deepfake content [3]
• Data Usage Scope
  : Review whether data collection practices used to train AI models comply with legal requirements [2]

Philippe Dufresne, Privacy Commissioner of Canada, stated: “The use of personal information without consent to create deepfake content, including intimate images, is a growing phenomenon that poses a serious risk to the fundamental right to personal privacy” [2].

The Canadian investigation is not an isolated incident, but part of a global wave of regulatory actions:

Jurisdiction	Regulatory Body	Type of Action	Current Status
UK	Ofcom	Formal Investigation	Ongoing [1]
Indonesia	Ministry of Communications	Platform Blocking	Implemented [1]
Malaysia	Ministry of Communications	Platform Blocking	Implemented [1]
EU	EDPD	Law Enforcement Investigation	Ongoing
US	FTC/DOJ	Under Monitoring	Monitoring Phase

This global regulatory trend reflects governments’ serious concerns about the abuse of AI deepfake technology, particularly the spread of non-consensual intimate images (NCII).

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According to the 2026 AI Industry Valuation Research Report, regulatory risk has become a core variable affecting AI company valuations [4]. Data from professional valuation institutions shows that

, provided there is uncertainty about their compliance status.

Risk Category	Valuation Discount Range	Impact Weight
Regulatory Compliance Uncertainty	25-30%	High
Content Security Risk	20-28%	High
Data Privacy Risk	20-25%	Medium-High
Technology Abuse Risk	15-20%	Medium
Intellectual Property Risk	10-15%	Medium

The transmission paths of regulatory risk to valuation include:

1. Increased Compliance Costs
   : Compliance spending is expected to account for 15-20% of AI enterprises’ operating costs
2. Constrained Growth
   : Content moderation requirements may limit user growth and engagement
3. Financing Hurdles
   : Investors’ preference for high-risk assets declines
4. Compressed Valuation Multiples
   : Shift from high-growth premium to risk-adjusted valuation

A comparison of valuations of major AI companies from 2025 to 2026 shows pricing differences due to regulatory risk:

Company	2025 Valuation	Valuation Multiple (ARR)	Regulatory Premium/Discount
OpenAI	$500B	High	Regulatorily Prepared (Premium)
Anthropic	$183B	Medium-High	Significant Compliance Investment (Neutral)
Databricks	$134B	27.9x ARR	Industry Average (Neutral)
Potential High-Risk Targets	TBD	Expected 15-30% Discount	Significant Regulatory Pressure

Case studies show that

[4].

• Valuation Multiples: P/E 35-40x, EV/Sales 12-15x
• Applicable Companies: Proactive compliance, high transparency AI enterprises
• Expected Discount: None

• Valuation Multiples: P/E 25-30x, EV/Sales 8-10x
• Applicable Companies: Companies undergoing compliance rectification
• Expected Discount: 15-20%

• Valuation Multiples: P/E 15-20x, EV/Sales 4-6x
• Applicable Companies: Companies facing formal investigations, lawsuits, or penalties
• Expected Discount: 25-35%

• Valuation Multiples: P/E 8-15x, EV/Sales 2-4x
• Applicable Companies: Current status of xAI
• Expected Discount: 40-50%

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xAI faces multiple fundamental challenges, with regulatory risk being just one of them:

In 2025, xAI experienced a wave of departures of key executives, including Chief Financial Officer (CFO) Mike Liberatore and General Counsel (GC) Robert Kiel [5]. This reflects deep-seated issues in the company’s governance structure. While Elon Musk’s consistent top-down management style helps maintain a unified vision, it also creates a high-pressure environment where disagreements are often suppressed [5].

• Monthly Cash Burn:
  $1 Billion
  [5]
• Planned Financing Scale:
  $9.3 Billion
  [5]
• Internal Warning: Employees need to “survive the next 12 months” [5]

xAI was founded to compete with rivals such as OpenAI, but leading in technological breakthroughs requires sustained capital investment and talent reserves. This goal faces severe challenges amid a high turnover environment.

xAI’s regulatory risk exposure can be evaluated from the following dimensions:

Risk Area	Current Score (0-100)	Industry Average	Gap
Data Compliance	45	70	-25
Content Moderation	35	75	-40
Privacy Protection	40	72	-32
Intellectual Property	55	78	-23
Cross-Border Compliance	50	70	-20
ESG Compliance	60	75	-15

1. Grok Deepfake Feature
   : Generating sexualized content without consent, directly triggering the Canadian investigation [1][2][3]
2. Data Collection Compliance
   : Legitimacy of using X platform user data to train AI models is questionable [3]
3. Content Moderation Mechanism
   : Existing moderation processes have failed to effectively prevent abusive behavior

Based on the above analysis, xAI’s valuation may face the following adjustments:

Valuation Item	Before Adjustment	After Adjustment	Adjustment Range
Valuation Multiple	30x ARR	15-18x ARR	-40% to -50%
Total Valuation	$400-500B	$200-250B	-50%
Financing Valuation	$90B	$45-55B	-40%

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There is a complex associated relationship between Tesla and xAI, which is of great significance to investors:

• xAI technology will be used for the intelligent development of Tesla’s Optimus robot [6]
• Tesla’s AI infrastructure spending has reached a record high, including high-end semiconductor clusters [6]
• Technological synergy of the Full Self-Driving (FSD) system

Related transactions between Tesla and xAI have raised concerns about [6]. Institutional investors question whether Tesla’s core value is being transferred to xAI, Musk’s private enterprise.

The transmission path of regulatory risk from xAI to Tesla is as follows:

xAI Regulatory Risk → X Platform Risk → Tesla Brand Reputation → Investment Value Loss → Valuation Adjustment
   (95)               (85)                 (70)                    (65)                    (55)

1. Brand Reputation Damage
   : As the core figure of both companies, Musk’s reputation is highly interconnected
2. Dispersed Regulatory Resources
   : Tesla may need to deal with additional scrutiny from regulators regarding its AI practices
3. Investor Confidence
   : Uncertainty may lead institutional investors to reduce their exposure

Based on the latest market data [7], Tesla’s investment value exhibits the following characteristics:

Indicator	Value	Industry Comparison
Market Capitalization	$1.41T	Extremely High
P/E (TTM)	268.65x	Far above the auto industry average (approx. 10-15x)
P/B	17.70x	High
ROE	6.91%	Medium-Low
Net Profit Margin	5.51%	Medium

Period	Return Rate
1 Month	-10.47%
6 Months	+36.34%
1 Year	+5.98%
3 Years	+233.54%

• Trend Judgment:
  Sideways/No Clear Trend
  [7]
• MACD Signal:
  Bearish Crossover
  [7]
• KDJ Signal:
  Bullish Crossover
  [7]
• Trading Range:
  $431.03 - $456.97
  [7]

• Consensus Rating:
  Hold (HOLD)
  [7]
• Median Price Target:
  $491.50
  (+12.1% from current) [7]
• Target Range:
  $300 - $600
  [7]
• Rating Distribution: Buy 38.8%, Hold 40.0%, Sell 21.2% [7]

Tesla’s current valuation largely reflects market expectations for its AI potential. However, this premium is facing erosion from regulatory risk:

Business Segment	Base Valuation ($B)	Regulatory Risk Discount	Risk-Adjusted Valuation ($B)
Traditional Automotive Business	150	5%	142.5
AI/Autonomous Driving	400	25%	300
Robotaxi	300	30%	210
Optimus	200	35%	130
Energy Business	100	10%	90
Total	1,150	-	872.5

• Current market capitalization ($1.41T) is
  approximately 62% higher
  than the risk-adjusted valuation ($872.5B)
• The AI business segment faces the most significant regulatory risk
• If regulatory pressure persists, Tesla may face a
  20-30% valuation pullback

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For the AI industry as a whole:

1. Focus on Compliance Capability
   : Prioritize AI companies with well-established compliance frameworks
2. Beware of Valuation Bubbles
   : Highly valued AI companies require careful assessment of regulatory risk premiums
3. Diversify Investments
   : Diversify allocations within the AI sector to avoid concentration in a single company

• Expected Return Rate: 8-12%
• Risk Level: Medium-High
• Applicable Investors: Long-term investors who recognize Tesla’s AI vision and can tolerate volatility

• Expected Return Rate: Highly uncertain (-20% to +50%)
• Risk Level: Extremely High
• Applicable Investors: Investors with extremely high risk tolerance, professional investors

• Expected Return Rate: 5-10%
• Risk Level: High
• Need to pay attention to transparency of related transactions and improvement of corporate governance

• Expected Return Rate: Market Average (3-7%)
• Risk Level: Low
• Applicable to risk-averse investors

Risk Category	Risk Description	Impact Level	Probability of Occurrence
Regulatory Penalties	xAI may face huge fines	High	Medium-High
Brand Reputation	Deepfake scandal affects Tesla’s brand image	Medium-High	High
Related Transaction Investigation	The SEC may intervene to review transactions between Tesla and xAI	Medium	Medium
Technological Talent Drain	High-pressure environment leads to departure of core talent	High	High
Financing Difficulties	Regulatory risk affects xAI’s financing capacity	High	Medium-High

Indicators requiring continuous monitoring:

1. Progress of the Canadian investigation and potential penalty decisions
2. Regulatory follow-up in other jurisdictions
3. Situation of executive departures at xAI
4. Disclosure of related transactions between Tesla and xAI
5. AI spending and progress in Tesla’s quarterly financial reports

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Regulatory risk of deepfake content is becoming a key factor affecting AI industry valuations. In jurisdictions with active regulation, AI companies may face a 15-30% valuation discount, with regulatory compliance uncertainty being the largest valuation compression factor [4].

The combination of regulatory risk and other challenges (executive departures, high cash burn) faced by xAI may lead to a 40-50% decline in its valuation. The company is currently in a high-risk state [5].

Tesla’s association with xAI exposes it to . Its current valuation ($1.41T) implies a high AI premium; if regulatory pressure persists, it may face a 20-30% valuation pullback [6][7].

Strategy	Recommendation	Rationale
Short-Term	Wait-and-See/Reduce Holdings	High uncertainty in regulatory risk, stock price volatility may intensify
Medium-Term	Selective Holding	If Tesla can demonstrate the independence of its AI business, holding may be considered
Long-Term	Focus on Governance Improvement	Focus on transparency of related transactions between Tesla and xAI and compliance progress

In the current environment, it is recommended that investors maintain a cautious attitude towards Musk-affiliated companies, reduce exposure, or wait for regulatory risks to become clear before making major investment decisions.

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[1] The Globe and Mail - “Canada’s privacy watchdog expands probe into X over Grok’s sexualized deepfakes” (https://www.theglobeandmail.com/canada/article-privacy-commissioner-investigation-x-grok-ai-elon-musk-deepfakes/)

[2] Politico - “Canada’s privacy watchdog investigating Musk’s xAI over sexualized deepfakes” (https://www.politico.com/news/2026/01/15/canadas-privacy-watchdog-investigating-musks-xai-over-sexualized-deepfakes-00731587)

[3] Office of the Privacy Commissioner of Canada - “News release: Privacy Commissioner of Canada expands investigation into social media platform X” (https://www.priv.gc.ca/en/opc-news/news-and-announcements/2026/nr-c_260115)

[4] FE International - “AI Business Valuation Model 2026: Methods, Metrics & Benchmarks” (https://www.feinternational.com/blog/ai-business-valuation-model-2026)

[5] AInvest - “Evaluating xAI’s High Attrition and Spending Amid Musk’s Vision for AI Supremacy” (https://www.ainvest.com/news/evaluating-xai-high-attrition-spending-musk-vision-ai-supremacy-2601)

[6] Chronicle Journal - “Tesla’s High-Stakes Balancing Act: AI Ambitions Clash with Legal Headwinds” (http://markets.chroniclejournal.com/chroniclejournal/article/marketminute-2026-1-13-teslas-high-stakes-balancing-act-ai-ambitions-clash-with-legal-headwinds-and-shifting-global-demand)

[7] Jinling AI Financial Database - Tesla (TSLA) Company Profile and Market Data

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• Top Left
  : Impact of regulatory risk factors on AI company valuation discounts, data sourced from industry valuation research reports
• Top Right
  : Comparison of AI deepfake regulatory intensity in major global jurisdictions
• Bottom Left
  : Analysis of the transmission of xAI regulatory risk to the investment value of Musk-affiliated companies
• Bottom Right
  : Correspondence between AI company risk levels and valuation multiples

• Top Left
  : Valuation and regulatory risk adjustment of Tesla’s various business segments
• Top Right
  : Cumulative impact of xAI regulatory risk events on Tesla’s stock price
• Bottom Left
  : Comparison of xAI’s regulatory compliance capability with the industry average
• Bottom Right
  : Investment decision matrix for Musk-affiliated Companies