Musk’s social media firm X bought by his AI company, valued at $33bn

(Reuters): Elon Musk’s xAI acquired X in a deal that valued the social media platform at $33 billion and allowed the value of his artificial intelligence firm to be shared with his co-investors in the company formerly known as Twitter.

The deal could also help xAI’s ability to train its chatbot known as Grok.

“xAI and X’s futures are intertwined,” Musk, who also heads automaker Tesla and SpaceX, wrote in a post on X: “Today, we officially take the step to combine the data, models, compute, distribution and talent.” He said the combination values “xAI at $80bn and X at $33bn ($45bn less $12bn debt)”.

Representatives for X and xAI did not immediately respond to requests for comment. Much of the deal’s specifics remain unclear, such as how X’s leaders would be integrated in the new firm or whether there would be regulatory scrutiny.

Musk, the world’s wealthiest man, is also a close ally of US President Donald Trump and heads the Department of Government Efficiency.

Saudi Arabian investor Prince Alwaleed bin Talal, who owns the investment company Kingdom Holding, said he had requested the development.

He noted his companies are the second-largest investors in X and xAI. “After this deal, the value of our investments is expected to reach between $4-5bn … and the meter is running,” he said in a post on X.

D.A. Davidson analyst Gil Luria said the price tag for X of $45bn when debt was included was not a coincidence.

“It is $1bn higher than the take-private transaction for Twitter in 2022.”

An investor in xAI who declined to be identified said they were not surprised by the deal, viewing it as Musk consolidating his leadership and management at his own companies.

Musk did not ask investors for approval but told them that the two companies had been collaborating closely and the deal would drive deeper integration with Grok, the investor said.

OpenAI rivalry

Musk’s xAI startup was launched less than two years ago and recently raised $10bn in a funding round that valued the company at $75bn, according to a media report.

It competes with the likes of Microsoft-backed OpenAI as well as with Chinese startup DeepSeek.

In February, Musk, 53, made a $97.4bn bid with a consortium for OpenAI, which was rejected and he has sued to prevent the ChatGPT maker from converting from a non-profit to a for-profit business. A judge this month denied Musk’s request for a preliminary injunction that would prevent the changeover.

As competition in AI intensifies, xAI has been ramping up its data centre capacity to train more advanced models, and its supercomputer cluster in Memphis, Tennessee, called “Colossus”, is touted as the largest in the world.

xAI introduced Grok-3, the latest iteration of its chatbot, in February.

The X platform could serve to further distribute xAI products, while also providing a real-time feed of users’ musings, screenshots and other data.

After buying Twitter, Musk gutted the company’s workforce, prompting advertisers to flee the platform and a rapid decline in revenue. Recently, brands have been returning to X as Musk’s influence in the Trump administration grows.

The seven banks that extended $13bn in loans to Musk to buy X kept the debt on their books for two years until they were able to sell it all at once last month, according to a source familiar with the transactions.

This was made possible after a surge in investor interest for exposure to AI companies along with X’s improved operating performance over the previous two quarters, among other factors, according to two people familiar with the matter.

After the merger, investors who bought the debt from the banks will profit, said Espen Robak, founder of Pluris Valuation Advisors, which specialises in illiquid assets.

“For sure the debt is worth more now, if not fully paid off.”

Separately, a US judge on Friday rejected a bid by Musk to dismiss a lawsuit claiming he had defrauded former Twitter shareholders by waiting too long to disclose his initial investment in the company.