Elon Musk’s artificial intelligence company, xAI, has acquired X, the social media platform formerly known as Twitter, for $33 billion (£52 billion). This move strengthens Musk’s control over his business empire.
The all-stock transaction, announced on Saturday (AEDT), merges two of Musk’s companies, along with Tesla and SpaceX. This decision is expected to accelerate the development of xAI’s artificial intelligence model, Grok.
Musk confirmed the deal in a post on X: “The combination values xAI at $80 billion and X at $33 billion ($45 billion less $12 billion debt).” He added, “xAI and X’s futures are intertwined. Today, we officially take the step to combine data, models, compute, distribution, and talent.”
However, X and xAI representatives did not immediately comment. The details regarding investor compensation, leadership integration, and regulatory considerations remain unclear.
Impact and market reactions
Technology analyst Paolo Pescatore of PP Foresight described the development as “unexpected.” Meanwhile, DA Davidson & Co analyst Gil Luria noted that the $45 billion valuation was significant, as it exceeded Musk’s 2022 purchase of Twitter by $1 billion. Consequently, this allows Musk to share xAI’s value with X’s co-investors.
Musk, the world’s wealthiest individual, has also expanded his influence in Washington, D.C., through his leadership of the Department of Government Efficiency (DOGE). As a result, this role could impact regulatory oversight of his businesses.
An investor in xAI, now part of the combined entity, stated that they were not surprised by the move. They viewed it as part of Musk’s broader strategy to consolidate control. According to the investor, Musk had not sought approval but had indicated that X and xAI were already collaborating closely. Furthermore, they added that the integration would enhance Grok’s capabilities.
Rivalry with OpenAI
Musk founded xAI less than two years ago, and the firm recently secured $10 billion in funding, valuing it at $75 billion. In February, Musk made a $97.4 billion bid, alongside a consortium, to acquire OpenAI, the developer of ChatGPT. However, the offer was rejected. OpenAI, which Musk co-founded in 2015, stated that it was not for sale.
Additionally, Musk has taken legal action to block OpenAI from shifting from a non-profit to a for-profit model. Nevertheless, a judge in California recently denied Musk’s request for a preliminary injunction against the change.
The AI sector has become highly competitive, with companies investing heavily in integrating AI solutions into their operations. To maintain its position, xAI has expanded its data centre capacity. Notably, its supercomputer cluster, Colossus, in Memphis, Tennessee, is said to be the world’s largest.
In February, xAI introduced Grok-3, the latest version of its chatbot, as it aims to compete with Microsoft-backed OpenAI and Chinese AI firm DeepSeek. Moreover, X is expected to play a crucial role in distributing xAI’s products while also providing real-time user-generated data to enhance AI development.
Evolution of X
Musk acquired Twitter in 2022 for $44 billion, taking the company private and announcing that “the bird is freed.” He then cut the workforce significantly, which led to a decline in advertising revenue. However, many advertisers have since returned to X, partly due to Musk’s growing influence in the Trump administration.
Musk’s $13 billion debt from acquiring X stayed with the banks for two years before they sold it last month. Increased investor interest in AI firms and improvements in X’s financial performance contributed to the sale.
Following the merger, investors who bought this debt are expected to benefit. According to Espen Robak of Pluris Valuation Advisors, which specialises in illiquid assets, “For sure, the debt is worth more now, if not fully paid off.”
Meanwhile, a US judge recently rejected Musk’s attempt to dismiss a lawsuit alleging he misled former Twitter shareholders by delaying disclosure of his initial investment in the company.
