Elon Musk Says He Has Sold X to His A.I. Start-Up xAI

Elon Musk announced on Friday that he had sold his social media company, X, to his artificial intelligence start-up, xAI. This unique arrangement sheds light on the intricate financial strategies within the business empire of the world’s wealthiest individual.

The deal, conducted entirely in stock, valued xAI at $80 billion and X at $33 billion. While X’s value had decreased from the $44 billion purchase price in 2022, it was still higher than the $12 billion valuation given by some of X’s recent investors. In comparison, xAI was valued at around $40 billion in its last funding round in December.

Both companies, privately owned, already collaborate closely, sharing resources such as engineers. xAI’s chatbot, Grok, is powered by data from X users and is accessible on the social media platform. X’s bankers have also indicated that a portion of the company’s revenue is derived from xAI.

In a statement, Mr. Musk emphasized the interconnected futures of xAI and X, stating that the combined entity would enhance user experiences while remaining committed to their core mission of truth-seeking and knowledge advancement.

This deal illustrates Mr. Musk’s ability to maneuver within his diverse business portfolio. By merging the declining X with the flourishing xAI, he demonstrates his strategic prowess. A similar tactic was employed in 2016 when he utilized Tesla stock to acquire SolarCity.

While Tesla, a publicly traded company, provides transparency to shareholders, Mr. Musk’s other ventures, including SpaceX, The Boring Company, and Neuralink, operate privately and under a veil of secrecy. Interchanging resources and personnel across his enterprises, Mr. Musk runs his companies as a cohesive entity.

Linda Yaccarino, CEO of X, expressed optimism about the future following the merger, while X declined to comment on the transaction.

Experts note that executives managing multiple companies often leverage their position to create interconnected empires. Eddie Lampert, for instance, utilized his real estate assets to support his retail business, Sears.

Nevertheless, Mr. Musk’s approach stands out, according to UCLA School of Law professor Andrew Verstein. He orchestrates deals that portray underperforming entities as successful through strategic acquisitions within his conglomerate.

X and xAI have followed divergent paths, with X facing financial challenges despite its widespread recognition. The social media platform’s revenue decline is attributed to advertisers’ hesitance due to Mr. Musk’s controversial stances and relaxed content moderation policies.

Despite recent efforts to attract advertisers, X continues to struggle financially, prompting internal emails urging a revenue boost. In contrast, xAI has experienced rapid growth, securing significant investments and expanding its operations.

While X aims to recover its financial stability, xAI’s progress has been notable. The A.I. start-up’s valuation has surged, reflecting its growth trajectory and market appeal.

xAI has also established a presence in Memphis, where Mr. Musk constructed a supercomputer envisioned as the world’s largest.

Mr. Musk founded xAI in 2023 to compete with OpenAI, a venture he co-founded. His departure from OpenAI in 2018 led to legal disputes, as he asserted his unique ability to develop responsible A.I. without jeopardizing humanity.

Recent transactions between X and xAI have showcased their interdependence, with xAI licensing data from X to bolster both companies’ operations. This symbiotic relationship could be beneficial for investors, fostering confidence in the combined entity.

The deal resolves uncertainties surrounding resource allocation between X and xAI, streamlining operations and enhancing efficiency. Investors’ satisfaction will hinge on the equity distribution in the new entity, ensuring fairness in the exchange process.

Internal reactions to the deal within X have been positive, signaling enthusiasm for the collaborative future ahead.

Ryan Mac contributed reporting.