xAI has completed a stock-only acquisition of X, valuing itself at $80 billion and X at $33 billion after debt adjustments. Elon Musk, who sold X Corp to xAI, recoups part of his earlier Twitter investment. This strategic move strengthens xAI’s position as it aims to rival OpenAI and enhances collaboration between xAI and X. While significant changes to the social network are not expected, the acquisition improves xAI’s valuation and solidifies Musk’s control over both entities.
xAI has successfully completed a stock-only acquisition of X, placing a remarkable valuation of $80 billion on xAI and $33 billion on X (considering $45 billion minus $12 billion in debt).
On March 28, Elon Musk revealed through X that he has sold X Corp, the entity that emerged from his 2022 acquisition of Twitter, to his newly established company xAI, which was founded in 2023. This surprising financial maneuver allows Musk to step back from the social media platform while still maintaining control, thanks to his ownership of xAI. Musk had previously taken on significant debt to acquire Twitter for $44 billion, and this new transaction enables him to reclaim $33 billion in xAI shares, all while navigating a complex financial landscape for his ventures.
Elon Musk Navigates Financial Waters While Expanding xAI
This strategic move allows Musk to recover $33 billion of the $44 billion he spent in 2022, taking it in the form of xAI shares. While he values X at $45 billion—a figure that may not reflect its true worth—it’s important to note that the company is encumbered with $12 billion in debt, likely stemming from the financial arrangements of his earlier acquisition. By acquiring X for $33 billion, xAI positions Musk to alleviate a potentially precarious situation that could have jeopardized his partners’ investments. Following this acquisition, xAI now holds all shares of X, which had previously not been publicly traded.
Projected to reach a valuation of $50 billion by the end of 2024, xAI has effectively gained $30 billion through this acquisition of X. This financial maneuver not only bolsters Musk’s startup but also allows him to divest from a challenging asset that needed significant development.
The specifics of xAI’s structure remain undisclosed, but Musk is recognized as its founder and primary shareholder. Notable investors include Fidelity, Larry Ellison, Saudi Prince Alwaleed bin Talal, Jack Dorsey, Sequoia Capital, and Andreessen Horowitz. Established in 2023 to rival OpenAI—an organization Musk co-founded before stepping away due to disagreements—xAI aims to advance its own AI, Grok, with aspirations to surpass ChatGPT.
Strategic Synergy Between xAI and X
Since its inception, xAI has maintained a close relationship with X. The Grok chatbot was first introduced on the social network before transitioning to an independent service, and various Grok tools have been integrated into the platform for tweet analysis and news summarization. Selling X to xAI makes strategic sense, enabling both entities to collaborate more effectively.
Elon Musk elaborated on this synergy, stating: “The futures of xAI and X are closely linked. Today, we officially take the step of combining data, models, computing power, distribution, and talent. This combination will unleash immense potential by merging advanced AI capabilities and xAI’s expertise with X’s massive reach. The combined company will offer smarter and 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 not only reflects the world but actively accelerates human progress.” With this acquisition, all Twitter data is now under the umbrella of his AI company.
While the acquisition of X by xAI is unlikely to bring drastic changes to the social network, which remains under Musk’s ownership, it is also improbable that there will be significant alterations in the development of Grok. This transaction is primarily economic, substantially enhancing xAI’s valuation while allowing Musk to restructure a complicated financial arrangement.
Interestingly, Musk made this announcement on a Friday evening, after the financial markets closed, amid a global buzz surrounding OpenAI, its competitor, which has been generating headlines with the advancements of GPT-4o in image generation.