Elon Musk’s artificial intelligence startup xAI has acquired his social media platform X in what’s seen as a bid to steal a march on AI rivals.
“The combination values xAI at US$80 billion (S$107 billion) and X at US$33 billion,” the billionaire wrote on Friday (March 28)) in a post on X. The value of X is US$45 billion when including US$12 billion of debt, he said, describing the purchase as an all-stock transaction.
The deal gives the new combined entity, called XAI Holdings, a value of more than US$100 billion, not including the debt, reported Bloomberg, quoting an anonymous insider.
The AI startup xAI benefits from buying the social network X. In the past, it has used the latter’s data to train its chatbot, Grok.
“XAI and X’s futures are intertwined,” Musk posted. “Today, we officially take the step to combine the data, models, compute, distribution and talent. This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”
X’s other backers will also heave a sigh of relief following the prolonged uncertainty they faced about their investment as users and advertisers fled the social network in droves following its acquisition by Musk.
Musk, the world’s richest person, acquired Twitter for US$44 billion in late 2022, a transaction that included debt. After taking control, he quickly moved to cut costs by slashing thousands of jobs, closing offices and renegotiating contracts. He also lifted certain content restrictions, claiming he favoured “free speech absolutism”.
However, the changes scared advertisers. They pulled out in fear that their promoted posts would appear alongside offensive content. Even with an expected boost in sales in 2025 following Trump’s election victory and Musk’s closeness to the president, X’s advertising business is still projected to be roughly half of what it was when Musk acquired the company.
xAI chatbot Grok
Musk has since used X to promote Grok, a chatbot developed by xAI. Grok was partly trained with posts from X users.
Meanwhile, xAI is competing with AI giants such as OpenAI, which Musk co-founded before the partnership ended in bitterness.
Observers have been quick to spot how the X deal benefits xAI.
“This helps integrate the system quite nicely,” said Shweta Khajuria, a Wolfe Research analyst who considers the deal good for both companies. “This gives Grok a unique advantage” by providing access to vast amounts of training data while also allowing xAI to control — or even cut off — that data flow to other companies.
Gene Munster, a managing partner at Deepwater Asset Management and an investor in both companies, wrote on X that the deal “makes a lot of sense”. He pointed out that xAI, having purchased X, now has an in-house proprietary data set that other companies don’t have access to. “Grok brings the brains. X brings the distribution,” he wrote. “OpenAI has the brains and brand distribution (e.g., Apple), but lacks X’s proprietary data. Long-term edge: xAI.”
Bloomberg Intelligence analyst Mandeep Singh predicted that xAI’s acquisition of X could set a precedent for other companies.
The deal “might be a sign that rivals including OpenAI, Anthropic, Perplexity, and Mistral will pursue deals to enhance their consumer reach and distribution,” Singh wrote. “We believe smaller social-media players will actively seek alliances with providers of large language models, given the premium valuation for xAI at US$80 billion, which is more than the combined market values of Snap, Pinterest, and Reddit.” /TISG
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