Comment Billionaire Elon Musk's xAI is to acquire billionaire Elon Musk's X in a deal that values the former at $80 billion and the latter at $33 billion.
While a merger always seemed a possibility, a question mark hovers over the timing. The valuation of X, when one includes $12 billion in debt, comes to $45 billion – conveniently a billion dollars more than when Musk acquired Twitter in 2022, rebranded it as X, and made it what it is today.
Musk announced the transaction on X at the end of last week, adding that "xAI and X's futures are intertwined."
The deal is an all-stock transaction, and with both companies privately held and lacking investor opposition, we'd take those valuations with a pinch of salt. By other measures, Twitter's value has declined since Musk acquired it.
The company has also suffered an exodus of advertisers, although some have since returned to the platform, reportedly only in a nominal manner – just enough to avoid Musk's ire.
Musk and his co-investors in X will benefit from the deal. The Tesla CEO through a consolidation of power, and his co-investors by allowing them to gain a stake in xAI. It's more challenging to see what xAI will gain from the acquisition – the company already has access to data on X with which to train its AI, Grok. In 2024, X tweaked its Terms of Service to allow user data to be shared with third parties. xAI would be able to make that dataset exclusive for training its models.
X's CEO, Linda Yaccarino, said "the future could not be brighter" in response to Musk's announcement, although Musk did not disclose how the management structure of the merged companies would work. It's possible Yaccarino's loyalty to Musk will result in a continued leadership role, perhaps running the X division within xAI.
Looking into the future requires speculation. More Grok is likely, although Musk had already been heavily promoting xAI's chatbot on X. As such, the service would have been further integrated regardless of the acquisition.
The main beneficiaries of the acquisition are X investors, who have endured years of turbulence since Musk acquired the platform. Owning shares in a growing AI startup is far more appealing than shares in a declining – though still significant – social media platform.
According to Gartner, worldwide generative AI spending is set to hit $644 billion in 2025, up 76.4 percent from 2024.
Having a slice of xAI, therefore, is a smart move. ®