xAI Acquires X/Twitter
@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).
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 unprecedented speed and scale.
X is the digital town square where more than 600M active users go to find the real-time source of ground truth and, in the last two years, has been transformed into one of the most efficient companies in the world, positioning it to deliver scalable future growth.
xAI and X’s futures are intertwined. 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.
CNBC:
Musk launched xAI less than two years ago with a stated goal to “understand the true nature of the universe.” The startup has been trying to compete directly with OpenAI, the richly valued AI startup that Musk co-founded in 2015 as a non-profit research lab. He later left OpenAI and has recently been involved in a public relations and legal spat with the company and CEO Sam Altman over the direction that it’s taken.
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X and xAI have already been intertwined, with xAI’s Grok chatbot available to users of the social media app.
It’s not clear to me whether this is essentially just a clever refinancing or whether something material has changed. On paper, Twitter is now profitable, and the business was sold for more than the original acquisition price. But the investors haven’t actually made a profit yet. They just own untradeable shares in a different private company. xAI, which seemed to come out of nowhere, is propped up by even more capital that it raised on the back of the AI boom, probably at more favorable terms. The ownership is now different, and perhaps the corporate structure and control are, too.
Looking into the future requires speculation. More Grok is likely, although Musk had already been heavily promoting xAI’s chatbot on X. As such, the service would have been further integrated regardless of the acquisition.
The main beneficiaries of the acquisition are X investors, who have endured years of turbulence since Musk acquired the platform. Owning shares in a growing AI startup is far more appealing than shares in a declining – though still significant – social media platform.
According to Gartner, worldwide generative AI spending is set to hit $644 billion in 2025, up 76.4 percent from 2024.
Previously:
- Social Media AI Training
- Calling AI a Bubble
- OpenAI Is Today Unrecognizable
- Elon Musk Finalizes Twitter Acquisition
4 Comments RSS · Twitter · Mastodon
It's not even a clever refinancing, it's an obvious PR move to protect Musk's brand - This way, he gets to pretend that he didn't destroy Twitter's value by pointing to the "fact" it sold for more than his purchase price.
I expect xAI to deliver exactly what Musk's other companies have delivered - the most dangerous to its operators car one can buy that was supposed to be self-driving, but can't outsmart a mural, a giant space rocket that hasn't had a successful launch, but was supposed to go to the Moon, etc.
Twitter might now be profitable, but I guess profitable isn't good enough if you pay interest on $13 billion in debt. Musk had one company $13 billion in debt and one company at the peak of the hype cycle, so he Ponzi-schemed his way out of the problem.
To be fair, though, it makes some sense for an LLM company to also own a massive firehose of data, and maybe Musk will have the next company ready in time for xAI to get the bills for the massive money-burning they're doing.
The way I understood it was that he lost 11bn in the deal (paid 44bn, sold for 33), but moved the debt from a company that has reduced the advertising revenue to a tenth of what it was before Musk took over, to a company that can ride on OpenAIs coat tails when it's out begging for money.
NEither has a path to profitability, despite Xitter now basically being able to demand that people buy ads on their website.
@Plume Yeah, I have only seen the EBITA of $1.25 billion reported, not the overall profitability, with yearly interest payments estimated between $1.1 to 1.5 billion. So it’s quite possible that it still needed cash.
