The all-stock transaction combines two of Musk’s companies and may make it easier to train his AI model, Grok.
Elon Musk’s xAI artificial intelligence startup has acquired Musk’s X, the social media company formerly known as Twitter, for $33 billion, marking the latest twist in the billionaire’s rapid consolidation of influence. short article insert The all-stock purchase announced on Friday merges two of Musk’s several portfolio firms, which also include Tesla and SpaceX, and may make it easier for Musk to train his Grok AI model.
Musk announced the transaction in a post on X, saying: “The combination values xAI at $80 billion and X at $33 billion ($45 billion less $12 billion debt). “xAI and X’s futures are intertwined,” according to him.
“Today, we officially take the step to combine the data, models, compute, distribution and talent.” X and xAI spokespersons did not respond to queries for comment right away. Much of the deal’s specifics remained unanswered, including how investors would be compensated, how X’s leaders would be absorbed into the new organization, and the possibility of regulatory scrutiny.
“This development feels surprising and somewhat unexpected,” PP Foresight analyst Paolo Pescatore stated. “To a certain extent, it closes a chapter in the turbulent saga of X.” “The choice of $45 billion is not a coincidence,” said Gil Luria, an analyst at D.A. Davidson and Co. “It is $1 billion higher than the take-private transaction for Twitter in 2022” and he may share the value of the xAI business with Twitter co-investors.
Musk, the world’s richest man, has also expanded his influence in Washington, D.C., by leading the Trump administration’s cost-cutting efforts as director of the so-called Department of Government Efficiency, or DOGE. This has also given him the ability to potentially influence the agencies that regulate his economic operations. An investor in xAI, which is now part of the combined business, told Reuters that they were not shocked by the transaction, seeing it as Musk solidifying his leadership and management at his own companies. The investor declined to be identified.
Musk did not ask investors for approval, but assured them that the two companies had been interacting closely, and the merging will push further integration with Grok.
OpenAI rivalry
Musk’s xAI venture was founded less than two years ago and just raised $10 billion in finance, valuing the company at $75 billion, according to media reports. Musk, 53, made a $97.4 billion deal with a consortium for OpenAI, the maker of ChatGPT, in February, but it was denied because OpenAI stated that the business was not for sale. Musk founded OpenAI with CEO Sam Altman in 2015. Musk competes directly with the popular OpenAI platform and has filed in federal court in California to prevent his competitor from transitioning from a non-profit to a for-profit company. A judge earlier this month refused Musk’s plea for a preliminary injunction to prevent the transfer.
The widespread deployment of AI software has sparked a wave of investment and competitiveness in Silicon Valley. Companies are looking for methods to integrate software into almost every aspect of their operations in order to improve efficiency. As competition in AI intensifies, xAI has been increasing up its data center capacity to train more advanced models, and its supercomputer cluster in Memphis, Tennessee, called “Colossus,” is advertised as the world’s largest.
In February, xAI introduced Grok-3, the most recent generation of its chatbot, in an effort to compete with Chinese AI firm DeepSeek and Microsoft-backed OpenAI. The X platform can help to disseminate xAI products while simultaneously delivering a real-time stream of user thoughts, screenshots, and other data.
Twitter feed
Musk agreed to buy X, then Twitter, for $44 billion in 2022, bringing the company’s public life to an end after its 2013 IPO, announcing that “the bird is freed” once the transaction was completed. Following the acquisition, he reduced the company’s workforce, causing advertisers to quit the platform and a dramatic drop in income. Brands have recently returned to X, as Musk’s influence grows in the Trump administration.
According to a source familiar with the transactions, the seven banks that lent Musk $13 billion in loans to buy X held the debt on their books for two years until selling it all at once last month. According to two people familiar with the situation, this was made possible by a spike in investor interest in AI businesses, as well as X’s improved operating performance over the previous two quarters.
Investors that purchased debt from banks will benefit from the merger, according to Espen Robak, founder of Pluris Valuation Advisors, which specializes in illiquid assets. “For sure the debt is worth more now, if not fully paid off.”