Elon Musk announced last Friday that his AI lab, xAI, had acquired his social media platform X in an all-stock transaction. XAI is now valued at an astronomical 80 billion dollars two years after its creation and X at 33 billion dollars (45 billion $ minus X's debt of 12 billion $).
The billionaire, also the owner of Tesla and SpaceX, had bought Twitter, which he renamed X, in October 2022 for the sum of 44 billion $. His aggressive stances had driven away advertisers and a portion of the social network's users, leading to a severe drop in advertising revenue and thus its valuation. A trend that seems to be reversing lately, largely due to his ties with Donald Trump. According to projections reported by the New York Post, X's advertising revenue could reach 2.26 billion dollars in 2025, an increase of 16.5% compared to 2024. However, they will still be well below the 4.5 billion $ recorded in 2021.
A Strategic More Than Financial Acquisition
Several months after calling for a pause in the AI field, Elon Musk announced the creation of xAI in 2023 and soon after unveiled Grok, the first product of the startup, initially named "TruthGPT", whose 3rd generation was presented last February.
To train this latest version of its generative AI, the startup, which raised 11 billion dollars in 2024 during two funding rounds with participation from Valor Equity Partners, Andreessen Horowitz, Sequoia Capital, used 200,000 NVIDIA H100 GPUs from its supercomputer Colossus, installed at its data center in Memphis.
By integrating X into its ecosystem, xAI will be able to leverage the enormous amount of data generated by the platform, which is said to have more than 600 million active users today, to refine its AI models. Unlike traditional acquisitions, where a company's value is based on its financial and commercial assets, here, the main asset lies in the colossal and real-time database that X represents.
According to Elon Musk, "The futures of xAI and X are intimately linked. Today, we officially take the step of combining data, models, computing capabilities, distribution, and talent. The combined company will offer smarter and more meaningful experiences to billions of people, while staying true to our fundamental mission of truth-seeking and advancing knowledge".