xAI Acquires X in $33B Deal, Securing its Short-Term Future

In a move that many industry observers expected, Elon Musk’s AI startup xAI has officially acquired X (formerly Twitter), in a deal that helps stabilize the social media platform’s immediate financial future.

While speculation has swirled for months about Musk using xAI to support X’s struggles, the confirmation came sooner and more directly than expected. The deal values X at $33 billion, despite wide-ranging market skepticism.

Musk Confirms the Deal

As Elon Musk explained:

“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.”

This positions X with a nominal valuation slightly higher than the $44 billion Musk paid in 2022. However, analysts have questioned this figure—Fidelity, for example, pegged X’s value at just $9.4 billion as recently as October 2023.

Financial Struggles and a Timely Boost

Since Musk’s acquisition, X has seen a substantial decline in advertising revenue due to controversial platform changes. At its peak in 2021, Twitter generated over $5 billion in revenue. According to investor pitch materials from January, X brought in just $1.2 billion in adjusted income in 2023.

Cost-cutting measures—such as laying off 80% of staff and closing office locations—brought spending down significantly. These reductions helped X reach near break-even status. But looming debt and continued advertiser reluctance kept bankruptcy a real possibility, until recent political shifts seemingly altered the platform's trajectory.

The U.S. election and the emergence of a new Trump-led administration have reportedly prompted some major advertisers to reconsider their stance, potentially due to Musk’s increased political influence.

xAI: Riding the AI Wave

xAI, Musk’s rapidly growing AI startup, has raised more than $12 billion and now claims a valuation of $80 billion following the X acquisition. It competes directly with AI giants like OpenAI, having built out comparable compute power and positioning itself as a key player in the race for artificial general intelligence (AGI).

xAI's strategic advantage lies in its access to real-time data from X, which it uses to train its Grok language model. This data-rich foundation is part of what investors see as xAI’s long-term value—despite concerns around misinformation and moderation on the platform.

Musk emphasized the synergy between the two companies:

“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.”

X CEO Linda Yaccarino echoed that sentiment, stating:

“The future could not be brighter.”

Risks and Strategic Implications

While the deal offers X a temporary financial lifeline, it also transfers the platform’s financial performance directly to xAI’s balance sheet. If X continues to lose money, that burden will now be shared by xAI, potentially dragging down its own valuation.

It’s worth noting that xAI was created, in part, due to Musk’s falling out with OpenAI after he failed to secure control of the organization. Musk has positioned xAI as a "non-woke" alternative, emphasizing its use of real-time, uncensored data from X to fuel its tools—an approach that has raised concerns about bias and misinformation.

Nonetheless, xAI may be poised for long-term success. With Musk's influence and potential government contracts—especially if the DOGE reform group implements AI systems for bureaucracy—xAI could become a central player in public-sector AI infrastructure.

Looking Ahead

At the heart of this deal is a belief—shared by Musk and many investors—that AI will be the dominant tech frontier, and that xAI is well-positioned to lead it. As a result, xAI is now effectively funding X, while being propped up by investor confidence and Musk’s own political and business influence.

Musk also announced that X now has 600 million monthly active users, up from 570 million in July 2023.

Whether this deal proves successful long-term remains to be seen, but for now, it has secured the survival of one of Musk’s most embattled ventures—and opened the door for closer integration between social media and AI.