Elon Musk’s AI company xAI has acquired Elon Musk’s social media platform X (formerly known as Twitter) in an all-stock transaction valued at $45 billion, which includes the assumption of $12 billion in debt. The billionaire also revealed that this acquisition values xAI at $80 billion and X at $33 billion. Prior to this new deal, X held a $6 billion stake in xAI.
Meanwhile, the combined entity will operate under a new holding company, xAI Holdings Corp, registered in Nevada, with Musk serving as president. According to Musk, this merger is expected to enable easier fundraising and streamline operations by combining data, models, compute power, distribution, and talent under a single corporate structure.
“The combined company will deliver smarter, more meaningful experiences to billions of people while staying true to our core mission of seeking truth and advancing knowledge. This will allow us to build a platform that doesn’t just reflect the world but actively accelerates human progress,” Musk said in a post on X.
xAI (founded by Musk in July 2023) is known for developing the popular (yet controversial) AI chatbot Grok, which has been integrated into the X platform. Interestingly last year (2024), Musk allocated a 25% stake in xAI to investors (lenders) who supported his $44 billion acquisition of Twitter (now X).
Now, this merger is expected to enhance xAI’s competitive edge in the AI sector by leveraging X’s extensive user base and real-time data. More importantly, the integration will boost the training and improvement of AI models – particularly Grok – by providing access to large amounts of user-generated content and interactions.
Speaking of financials, in December 2024, xAI completed a $6 billion Series C funding round, raising its valuation to around $50 billion. Notable investors in this round included Andreessen Horowitz, Sequoia Capital, Fidelity Management & Research Company, Kingdom Holding, and more. While, last month, reports indicated that xAI was seeking an additional $10 billion in funding, aiming for a valuation of $75 billion.
The scenario becomes noteworthy as investors like Saudi Arabia’s Kingdom Holding, Andreessen Horowitz, and Sequoia Capital are significant stakeholders in both companies – X and xAI.
Notably, since acquiring Twitter in 2022 for $44 billion, Musk rebranded it as ‘X’ and implemented significant changes, including restructuring its workforce and altering user features. However, after the takeover, X experienced a substantial decline in value. In September 2024, Fidelity Investments estimated that X’s worth had plummeted by nearly 80%, valuing the company at approximately $9.4 billion. The decline in valuation follows a period of financial challenges, including revenue declines and advertiser withdrawals due to policy changes.
In terms of financial numbers, the company’s annual revenue dropped significantly by nearly 50% over two years, falling to $2.7 billion last year. But X is now reportedly nearly twice as profitable based on adjusted earnings. Experts believe that Elon Musk’s support for the new US President, Donald Trump and his increasing influence on government policy are playing an important role in improving investor sentiment toward Musk-owned companies.
But in the meantime, X is currently involved in multiple legal disputes worldwide. For example in India, X has filed a lawsuit against the government’s alleged misuse of the Information Technology Act, claiming that authorities are bypassing legal safeguards to arbitrarily censor online content. Additionally, at the start of this year, the US Securities and Exchange Commission filed a lawsuit against X over allegedly committing fraud with its investors. According to the SEC’s new lawsuit, this could be a case of defrauding the company’s stakeholders of $150 million.
Coming back to the latest development, the move comes at a time when xAI recently joined the AI Infrastructure Partnership (AIP), a consortium backed by Microsoft (a prominent backer of OpenAI) and others, aiming to invest over $30 billion in AI infrastructure across the United States. This move is noteworthy as Musk is already involved in a legal fight with the ChatGPT maker over its transition to a for-profit model.
