In a significant move, Elon Musk’s xAI artificial intelligence firm has acquired the social media platform X, previously known as Twitter, for a staggering $33 billion. This all-stock deal, announced on Friday, represents another chapter in Musk’s rapid consolidation of power across various sectors, including automaking with Tesla and space exploration with SpaceX. The acquisition is expected to enhance Musk’s ability to train his AI model, Grok.
Musk shared the transaction details in a post on X, stating that the merger values xAI at $80 billion and X at $33 billion, which accounts for $45 billion minus $12 billion in debt. He emphasized, “xAI and X’s futures are intertwined,” indicating a strategic vision for combining their resources, data, and talent.
However, specifics regarding investor compensation, the integration of X’s leadership, and potential regulatory scrutiny remain ambiguous. Analyst Paolo Pescatore from PP Foresight remarked, “This development feels surprising and somewhat unexpected,” suggesting that it may close a turbulent chapter in X’s history.
Analyst Gil Luria from DA Davidson & Co noted that the choice of $45 billion for the acquisition is not coincidental. It is $1 billion above the take-private transaction price for Twitter in 2022, allowing Musk to share the value of xAI with co-investors of X. This acquisition not only strengthens Musk’s business empire but also positions him to exert influence in Washington, D.C., particularly as he oversees cost-cutting initiatives under the Trump administration’s Department of Government Efficiency, colloquially known as Doge.
Investors in xAI expressed that the merger is not surprising, viewing it as a move for Musk to consolidate his leadership and management across his companies. Notably, Musk did not seek direct approval from investors, instead informing them about the collaborative nature of the two firms and how the integration aims to enhance Grok’s capabilities.
Launched less than two years ago, xAI recently raised $10 billion in a funding round that valued the company at $75 billion. In an earlier attempt to expand his AI portfolio, Musk made a $97.4 billion bid for OpenAI, the maker of ChatGPT, which was ultimately rejected. Musk, a co-founder of OpenAI, continues to face legal challenges in federal court to prevent the organization from transitioning to a for-profit model.
The competitive landscape for AI is intensifying, with companies rushing to integrate advanced AI technologies into their operations. In response, xAI has increased its data center capacity and is leveraging its supercomputer cluster, Colossus, in Memphis, Tennessee, touted as the largest globally. The recent release of Grok-3, a sophisticated chatbot, illustrates xAI’s commitment to competing with leading firms like DeepSeek and OpenAI.
Furthermore, the X platform offers an advantageous avenue for distributing xAI products while providing real-time user data, which can enhance AI training models.
Musk's acquisition of X in 2022 for $44 billion marked the end of the platform’s tenure as a public company. Following this, he made significant workforce reductions, which initially led to a drop in advertising revenue. However, as Musk's influence within the Trump administration grew, brands began returning to X, signaling recovery.
The seven banks that financed Musk's acquisition by extending $13 billion in loans maintained the debt for two years before selling it last month, following an increase in investor interest in AI companies and improved operating performance from X over the past two quarters. Analysts suggest that investors who bought the debt from these banks will see profits, indicating that “the debt is worth more now, if not fully paid off.”
In a separate development, a U.S. judge recently rejected Musk’s attempt to dismiss a lawsuit alleging that he defrauded former Twitter shareholders by delaying the disclosure of his initial investment in the company. This ongoing legal challenge adds another layer of complexity to Musk's ambitious plans for xAI and X.
Overall, the acquisition of X by xAI represents a pivotal moment in the tech industry, one that could redefine the interplay between social media and artificial intelligence as Musk continues to expand his influence across multiple domains.
