Elon Musk announced that his artificial intelligence startup xAI has officially merged with social platform X (formerly Twitter) in a stock-swap deal that values X at $33 billion and xAI at $80 billion, CNBC reports.
"xAI and X’s futures are intertwined," Musk wrote in a post on X. "Today, we officially take the step to combine the data, models, compute, distribution and talent."
According to Musk, the merger will unlock "huge potential" by combining xAI's advanced technologies with X's significant reach. The total cost of the X acquisition was $45 billion, of which $12 billion was debt.
The deal is essentially a stock swap: X investors will receive a stake in xAI. Both companies are privately held and wholly controlled by Musk. Their joint investors include Andreessen Horowitz, Sequoia Capital, Fidelity, Vy Capital and Kingdom Holding Company of Saudi Arabia.
Musk, who also heads Tesla and SpaceX, acquired Twitter in 2022 for about $44 billion and soon renamed the platform X, significantly cutting costs and focusing its development on what he called a "super app." After the merger was announced, X CEO Linda Iaccarino wrote, "The future has never looked brighter."
xAI was founded less than two years ago with the ambitious goal of "understanding the true nature of the universe." The company positions itself as a competitor to OpenAI, Google, and Microsoft. Musk, a co-founder of OpenAI, left the company in 2018 and has since been a frequent critic of it, including CEO Sam Altman.
As part of xAI, Musk’s team is developing large-scale language models and software, including Grok, a chatbot that is already integrated into the X platform. In June, xAI announced the construction of the Colossus supercomputer in Memphis, Tennessee, to train Grok. Part of the system is already operational. The project has raised concerns among environmentalists and civic activists due to its lack of proper oversight and use of gas turbines.
Investors valued xAI at $50 billion in its previous funding round. In February, Bloomberg reported that the company was in talks to raise another round at a valuation of $75 billion. Meanwhile, OpenAI has raised at a valuation of $260 billion, and another AI player, Anthropic, was recently valued at $61.5 billion.
This is not the first merger of companies in Musk's orbit: in 2016, Tesla acquired SolarCity, a startup founded by his cousins Peter and Lyndon Reeve, for $2.6 billion. Despite a shareholder lawsuit over a potential conflict of interest, a Delaware court sided with Musk and allowed the deal to stand without any compensation for Tesla.