Insider Brief
- Elon Musk’s AI startup xAI has acquired social media platform X, formerly Twitter, in an all-stock deal valuing the combined companies at $113 billion.
- The merger consolidates data, user access, and compute power under xAI, giving it a strategic edge in competing with OpenAI and other AI developers.
- Musk says the deal will create smarter, more meaningful user experiences while turning X into a tool that accelerates human progress.
Elon Musk’s artificial intelligence startup xAI has acquired the social media platform X, formerly known as Twitter, in an all-stock transaction that combines two of his most high-profile ventures.
Musk announced the deal Friday in a post on X, stating the transaction values xAI at $80 billion and X at $33 billion, a steep decline from the $44 billion Musk paid for the platform in 2022. The companies were already closely tied, but the merger brings the full resources of X under xAI’s umbrella.
“xAI and X’s futures are intertwined,” Musk wrote in a post on X. “Today, we officially take the step to combine the data, models, compute, distribution and talent.”
Both companies are privately held and share investors, infrastructure, and leadership. xAI, founded in 2023 as Musk’s answer to OpenAI, has relied heavily on X’s troves of user-generated content to train its language models. Its chatbot Grok is already embedded as a key feature on the social media platform.
The all-stock deal appears to consolidate Musk’s hold over his expanding AI empire while positioning xAI to better compete with the likes of OpenAI and Google DeepMind. The integration could also shield investors in X — whose value has been volatile — by rolling them into a fast-growing AI company.
As noted by BBC, “The move may be aimed at protecting investors, who helped him purchase X, from losing money.”
Reasons Why This Happened
The acquisition is the latest in a series of aggressive moves by Musk to dominate the AI space and reassert influence over OpenAI, the company he co-founded in 2015 but left in 2018. xAI launched last year and quickly staffed up with top talent from DeepMind, Microsoft and OpenAI, while also raising billions in funding.
In December, xAI closed a $6 billion funding round that valued the company at $45 billion, according to TechCrunch. By Friday, Musk had raised xAI’s valuation to $80 billion in the merger announcement. Meanwhile, X’s valuation has fluctuated widely, with Fidelity last year marking it down to below $10 billion before it rebounded under Musk’s political and media strategy. Musk now claims X has over 600 million active users.
TechCrunch reported that the $33 billion valuation of X includes a deduction of $12 billion in debt, down from a previous enterprise value of $45 billion. The sale therefore formalizes the reality that Twitter/X is worth far less than Musk’s 2022 purchase price — but now gains new purpose as a data engine for xAI.
“The move appears sensible, considering the current trend of increased investments in AI, data centres and computing,” said Paolo Pescatore, founder of PP Foresight, in a statement to BBC.
Musk points out that the move will ultimately benefit the user.
“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,” Musk writes. “This will allow us to build a platform that doesn’t just reflect the world but actively accelerates human progress.”
Musk has also used the acquisition to solidify xAI’s comparative advantage. OpenAI, its primary rival, does not own a consumer-facing app of the same scale. Musk’s control of X gives xAI a direct distribution channel to hundreds of millions of users — something other AI labs lack.
TechCrunch notes this makes xAI “one of the only frontier AI developers with access to a major social network and its data.” This could be especially valuable as competition for training data intensifies.
Why This Is Important
This deal signals a shift in how AI companies may consolidate assets to accelerate their development and access to users. By folding X into xAI, Musk is not just merging two companies — he is bringing together a massive source of human-generated content with the compute power and models designed to learn from it.
It also marks a turning point in the race between xAI and OpenAI. While OpenAI continues to dominate headlines with products like ChatGPT, Musk’s new company is catching up. In February, xAI released Grok 3, a language model competitive with leading systems in math, science, and code. The acquisition gives xAI even more data and reach to refine and distribute future versions.
But the move also raises concerns about concentration of power. With the merger, Musk now controls a leading AI company and one of the world’s most influential social media platforms — both run with minimal oversight and unified leadership. Critics say that blurring of corporate lines has caused problems before and may pose regulatory risks in the future.
There are also political implications. As reported by BBC, Musk has taken on an increasingly public role in U.S. politics, now serving as a top adviser to President Donald Trump and leading efforts to cut federal spending. He has also contributed millions to political races, including a Wisconsin Supreme Court election. On Friday, the state’s attorney general moved to block Musk from distributing checks to voters — a sign of how entwined his business moves and political actions have become.
Meanwhile, Musk remains entangled in a legal dispute with OpenAI, which he sued for abandoning its nonprofit mission. Earlier this year, Musk led a $97.4 billion unsolicited takeover bid for OpenAI, which CEO Sam Altman promptly rejected. Reports from the Wall Street Journal indicate OpenAI is now close to securing a $40 billion investment from Japan’s SoftBank — contingent on the completion of its corporate restructuring into a fully for-profit entity.
While Musk fights OpenAI in court and in public, xAI’s acquisition of X could help him reshape the AI race on his own terms — a race that he feels is just starting. As he put it in his Friday announcement, “I would like to recognize the hardcore dedication of everyone at xAI and X that has brought us to this point. This is just the beginning.”
