Elon Musk’s artificial intelligence startup, xAI, has officially acquired X (formerly Twitter) in a deal valuing the social media platform at $33 billion. The transaction, described as an all-stock deal, marks a significant strategic shift, further integrating Musk’s ventures in AI and social media.
“The combination values xAI at $80 billion and X at $33 billion,” Musk announced on X, noting that X’s value reaches $45 billion when factoring in $12 billion in debt. The new entity, XAI Holdings, is now valued at over $100 billion, excluding the debt, according to sources familiar with the matter.
The acquisition streamlines Musk’s business operations and strengthens the synergy between X and xAI, which has already leveraged X’s vast data to train its chatbot, Grok. The deal also provides clarity for X’s investors after months of uncertainty surrounding their stakes due to Musk’s sweeping changes at the platform.
Morgan Stanley served as the sole financial advisor, representing both parties in the deal. Investors backing xAI—Sequoia Capital, Andreessen Horowitz, Fidelity Investments, and BlackRock—also have investments in X, further intertwining Musk’s business ecosystem.
Since Musk acquired Twitter for $44 billion in late 2022, he has drastically cut costs by eliminating thousands of jobs, shutting down offices, and renegotiating contracts. His push for “free speech absolutism” led to the removal of certain content restrictions and the reinstatement of previously banned accounts.
However, these changes deterred advertisers, who feared their promotions might appear alongside controversial content. This caused a significant drop in X’s ad revenue, with sales expected to be half of what they were before Musk’s takeover.
“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.”
Over the past year, Musk has actively used X to promote Grok, xAI’s chatbot trained using posts from X users. The startup is competing with AI giants like OpenAI, which Musk co-founded but later parted ways with.
Musk frequently blends his ventures, sharing investors, technology, and employees. xAI operates from the same office as X in San Francisco, and as of January, X had acquired a $6 billion stake in xAI, further linking the two businesses.
“This helps integrate the system quite nicely,” said Shweta Khajuria, a Wolfe Research analyst who views the deal as a positive for both of Musk’s businesses. “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” by giving xAI an in-house proprietary data set that other companies don’t have access to. “Grok brings the brains. X brings the distribution,” he posted. “OpenAI has the brains and brand distribution (e.g., Apple), but lacks X’s proprietary data. Long-term edge: xAI.”
A spokesperson for X declined to comment, pointing Bloomberg to a post from X CEO Linda Yaccarino. “The future could not be brighter,” she wrote. It’s unclear whether this merger will affect her role as X’s CEO.
Bloomberg Intelligence analyst Mandeep Singh wrote Friday that xAI’s acquisition of X could set a framework for deals involving other social networking 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 $80 billion, which is more than the combined market values of Snap, Pinterest and Reddit.”
Industry experts believe this merger could serve as a model for future AI and social media integrations. Bloomberg Intelligence analyst Mandeep Singh noted that xAI’s acquisition of X might set a precedent for similar deals in the tech industry.
Since Musk’s acquisition, X has been valued significantly lower than the $44 billion price tag he originally paid. For instance, Fidelity marked down its stake in X by over 70% as of November 2023.
However, X has recently seen a slight resurgence, partly due to Musk’s advisory role to former U.S. President Donald Trump. This relationship has reportedly encouraged some advertisers to return, aiming to maintain favorable ties with both Musk and Trump.
In early 2024, X secured nearly $1 billion in new equity from investors, aligning its valuation with Musk’s 2022 buyout price. Additionally, banks that financed Musk’s Twitter purchase have now offloaded their debt without incurring losses— a notable shift from 2022 when some firms valued it at just 60 cents on the dollar.
X is now on track for its first year of ad revenue growth since Musk’s takeover. Analysts project that U.S. advertising revenue will grow by 17.5% in 2025, reaching $1.31 billion. Globally, X’s ad revenue is expected to hit $2.26 billion this year, marking a 16.5% increase.
However, some industry experts speculate that advertisers may still be returning out of caution, fearing potential legal action from Musk.
This acquisition solidifies Musk’s ambition to merge AI, social media, and technology under one ecosystem. By aligning xAI and X, Musk is creating a unified platform that could redefine how AI-powered content and social media function together.
With xAI leading AI innovation and X providing real-time data for training models, XAI Holdings is poised to become a major player in both artificial intelligence and digital media.
