What just happened? Elon Musk has orchestrated another move in his sprawling business empire, announcing on Friday that his artificial intelligence firm, xAI, has acquired X (formerly Twitter). The all-stock transaction values X at $33 billion, including $12 billion in debt, and xAI at $80 billion, creating a combined entity Musk says will "unlock immense potential" and provide "smarter, more meaningful experiences" for users.
In a post on X, Musk stated, "The futures of xAI and X are interconnected. Today, we officially take the step to merge our data, models, computing power, distribution, and talent."
This deal marks a significant moment for both companies, which have been on divergent trajectories since Musk acquired Twitter in 2022 for $44 billion. Following his takeover, X faced a series of challenges, including plummeting advertising revenue, mass layoffs that reduced its workforce by 80 percent, and controversial policy changes that alienated major advertisers.
Also see: Fear and favor are bringing advertisers back to X under Musk
By late 2024, Fidelity had slashed X's valuation to just $12 billion. However, the platform's fortunes began to improve after Donald Trump's reelection and Musk's appointment to lead the Department of Government Efficiency in the new administration. These developments rekindled advertiser interest and helped stabilize X's financial outlook.
@xAI has acquired @X in an all-stock transaction. The combination values xAI at $80 billion and X at $33 billion ($45B less $12B debt).
– Elon Musk (@elonmusk) March 28, 2025
Since its founding two years ago, xAI has rapidly become one of the leading AI labs in the world, building models and data centers at...
Meanwhile, xAI has been on a rapid ascent since its founding in 2023. Originally established to explore the nature of the universe through AI research, xAI has become a player in the rocketing artificial intelligence space. Its chatbot, Grok – designed as an "unfiltered" alternative to rivals like OpenAI's ChatGPT – has been integrated into X since late 2023.
The company also boasts one of the world's most powerful supercomputers, Colossus, located in Memphis, Tennessee. This infrastructure positions xAI to challenge tech giants such as OpenAI and Google.
This is it: The world's smartest AI, Grok 3, now available for free (until our servers melt).
– xAI (@xai) February 20, 2025
Try Grok 3 now: https://t.co/Tj0afLoxEz
X Premium+ and SuperGrok users will have increased access to Grok 3, in addition to early access to advanced features like Voice Mode pic.twitter.com/YgKavSCiWr
The merger consolidates the two companies' resources, which already overlap. xAI has been using data from X posts to train its AI models since 2023, following a change to X's privacy policy. This integration allows xAI to refine its algorithms using real-time data while deploying new models directly on X for immediate user feedback.
Despite Musk's optimism, the deal raises concerns about transparency and potential conflicts of interest. Both companies are privately held and controlled by Musk, prompting questions about how investors in each entity will be compensated.
For example, Columbia Law School professor Eric Talley told The New York Times that while merging the companies resolves some issues related to resource allocation, it could leave some investors feeling shortchanged if the terms favor one side disproportionately.
Social media platforms like X are increasingly being repurposed as data-rich training grounds for AI development rather than standalone businesses.
Financial analysts have also pointed out that by folding X – a company with declining value – into xAI – a rapidly growing enterprise – Musk effectively boosts the overall valuation of his holdings while leveraging synergies between social media and AI development.
This strategy mirrors Musk's 2016 acquisition of SolarCity using Tesla stock – a move that drew scrutiny at the time but ultimately aligned two businesses under a shared vision.
For users of X, immediate changes may be subtle. Paying subscribers already have access to Grok, and xAI has long used user data for AI training. However, Musk's comments suggest deeper integration is on the horizon. Enhanced AI-driven features – such as personalized content recommendations and more advanced chatbots – could redefine how users interact with the platform.
While Musk presents the merger as a game-changer for both companies and their users, it also highlights broader trends reshaping Silicon Valley. Social media platforms like X are increasingly being repurposed as data-rich training grounds for AI development rather than standalone businesses. As Musk consolidates his ventures under a unified strategy, he positions himself at the forefront of this shift – but not without controversy or skepticism.
Musk merges startup xAI and Twitter, betting on AI to revitalize social media
