Musk’s xAI buys his own social network X. Why?

Elon Musk’s AI startup xAI has acquired his other company, X, in an all-stock deal. He said the transaction values xAI at $80 billion and X at $33 billion ($45 billion less $12 billion of debt).

@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…

— Elon Musk (@elonmusk) March 28, 2025

The billionaire highlighted his firms’ progress:

• xAI “has rapidly become one of the leading AI labs”;
• X is a “digital town square” with 600 million active users.

“The futures of xAI and X are intertwined. Today we are officially taking a step toward unifying data, models, compute, distribution and talent. This union will unlock enormous potential by combining xAI’s cutting-edge capabilities and expertise in artificial intelligence with X’s vast reach,” Musk stressed.

As both companies are private, the deal is likely an exchange of shares in which X investors receive a stake in xAI, CNBC wrote.

According to The Wall Street Journal, the deal entails swapping X and xAI shares for equity in a new holding company called xAI Holdings Corp. Executives of both firms believe the step will make it easier to raise money for the combined venture.

The combined company is worth more than $100 billion excluding debt, noted Bloomberg.

Online, jokes proliferated about selling companies to oneself. Prediction market Polymarket quipped that even it could not have predicted such a move.

Congratulations to @elonmusk on xAI’s acquisition of X.

Not even we could have predicted this! pic.twitter.com/6d0ao7h3ci

— Polymarket (@Polymarket) March 28, 2025

In 2022 Musk bought Twitter for $44 billion and later rebranded it as X. He launched xAI in 2023 with the goal “to understand the true nature of the universe.” The startup aims to compete with OpenAI, which the billionaire co-founded in 2015 as a non-profit, but he later left over disagreements about its direction.

Sam Altman’s firm is in talks with the California attorney general’s office about changing its corporate structure to a for-profit entity.

In August 2024, Musk revived a lawsuit against OpenAI. The complaint alleges that the AI startup and two of its founders—Altman and Greg Brockman—violated the company’s founding agreement by putting commercial interests above the public good.

xAI and X have already worked together—the Grok chatbot is integrated into the social network. In July 2024 the platform automatically enabled AI training on user data.

Why the deal?

Bloomberg noted the benefits of combining X and xAI:

• xAI would gain full control over X’s data—billions of user posts. The company could refuse to license them to AI rivals;
• X would help xAI distribute the Grok chatbot and other products to its users.

We’re investors in xAI and X, and this combo makes a lot of sense.

Grok brings the brains. X brings the distribution (600M MAUs) and a unique data asset.

OpenAI has the brains and brand distribution (e.g., Apple), but lacks X’s proprietary data.

Long-term edge: xAI. https://t.co/EpZvQC76OB

— Gene Munster (@munster_gene) March 28, 2025

“We are investors in xAI and X, and this combination makes a lot of sense. Grok offers the brains. X the distribution (600 million users) and a unique data asset. OpenAI has the brains and brand distribution (e.g., Apple), but lacks X’s proprietary data. Long-term edge: xAI,” said Gene Munster, managing partner at Deepwater Asset Management.

Another advantage is the ability to assign “any” valuation to X and xAI, provided investors do not object. Earlier the AI startup raised $6 billion at a $50 billion valuation. The new deal involves no fresh capital, yet the valuation has risen.

New York Times reporter Ryan Mac mocked the figures:

“I also sold my 2008 Honda Accord for $1 million,” — wrote he.

X was valued at the same price Musk paid for the social network. Previously its value had fallen to as low as $9.4 billion, according to Fidelity.

D.A. Davidson analyst Gil Luria says the $45 billion price for X including debt is no accident. It is $1 billion more than the 2022 Twitter acquisition price.

One xAI investor said he views the deal as Musk consolidating his leadership across his companies. According to him, the billionaire did not seek permission from other shareholders.

A precedent

AI developers may follow Musk’s lead and look to acquire social networks to obtain datasets needed to train AI.

“We believe that smaller players in social media will actively seek alliances with large-language-model providers, given xAI’s premium $80 billion valuation, which exceeds the combined market value of Snap, Pinterest and Reddit,” noted Bloomberg Intelligence analyst Mandeep Singh.

In January the startup Perplexity AI said it intended to acquire the U.S. TikTok.

In July 2024, Musk posted a poll on X proposing that Tesla invest $5 billion in his AI startup xAI at a valuation set by reliable, independent investors.

Earlier, Tesla shareholders sued the CEO and the board over the billionaire’s decision to found xAI.