Elon Musk's ambition with a $100 billion super company

More than two years after acquiring Twitter and renaming it X, Elon Musk has merged X with xAI. The AI ​​company is valued at $80 billion , while the social network is valued at $45 billion . Musk said the transaction is worth $33 billion , after subtracting $12 billion in debt from X.

Bloomberg , citing unnamed insiders, said the deal would value the new combined entity, called XAI Holdings, at more than $100 billion before debt. The source added that Morgan Stanley was the sole bank involved in the deal and represented both parties.

The Superiority of xAI

For Musk, the deal streamlines his business operations and strengthens the relationship between X and xAI, which has used data from the social network itself to improve its chatbot.

In addition, Bloomberg commented that this deal also brings a solution for other investors at X after months of instability when changes from Musk led to a wave of departures from users and advertisers.

Elon Musk said his xAI startup has merged with X, a social media platform also owned by the billionaire, in an all-stock deal. Photo: Reuters.

"The future of xAI and X is intertwined. Today, we officially take the step of combining data, models, compute, distribution, and talent," the billionaire said on the X account.

Notably, the Tesla CEO added that the merger would “unlock enormous potential by combining xAI’s advanced AI capabilities and expertise with X’s massive reach.”

In fact, throughout 2024, Musk used the same service to promote Grok, a chatbot developed by xAI and trained in part using posts from X users.

“This makes for a pretty nice system integration, giving Grok a unique advantage by providing access to a large amount of training data, while also allowing xAI to control — or even cut off — that data flow to other companies,” said Shweta Khajuria, an analyst at Wolfe Research.

Gene Munster, managing partner at Deepwater Asset Management and an investor in both companies, wrote on X that the deal is “very significant” as it gives xAI an internal proprietary dataset that other companies don’t have access to.

“Grok brings the brains, and X will be the distribution. OpenAI has the brains and brand distribution partners (e.g. Apple), but lacks X’s proprietary data. That’s the long-term advantage of xAI,” Munster said.

Paving the way for new mergers

xAI was founded by Elon Musk in March 2023, with the stated goal of “understanding the true nature of the universe.” The startup has sought to compete directly with OpenAI, also an organization Musk co-founded in 2015 as a non-profit research lab.

The merger gives xAI an advantage in data sources from X. Photo: The Verge.

He later left OpenAI and has recently been in frequent public and legal disputes with the company and CEO Sam Altman over its direction.

At xAI, Musk’s team has developed large language models and AI software products, competing with those from OpenAI as well as Google, Microsoft, Meta, and others. X and xAI have been linked, with xAI’s Grok chatbot being integrated into websites and social media apps.

xAI's acquisition of X could set a precedent for deals involving other social media companies, according to Bloomberg analyst Mandeep Singh.

“This could be a sign that competitors including OpenAI, Anthropic, Perplexity, and Mistral will pursue similar deals to increase their consumer reach and distribution.

“We believe smaller social media companies will actively seek alliances with large language model providers given that xAI’s valuation is currently at $80 billion , which is higher than the combined market capitalization of Snap, Pinterest, and Reddit,” Singh wrote.

The Grok 3 model, which was released in February, is considered to be on par with leading AI models such as Claude 3.5 or GPT-4o. Photo: Jim Clyde Monge.

This is also not the first time Musk has merged two of his organizations. In 2016, Tesla acquired SolarCity for $2.6 billion . The solar installation company was founded by his cousins, Lyndon and Peter Rive, and is funded by Musk, who serves as chairman of the board.

Musk acquired Twitter in a deal worth about $44 billion in late 2022. He made major cost cuts and soon renamed it X. After an initial period of direct management, Musk hired Linda Yaccarino as CEO of X in June 2023.

X currently owns a $6 billion stake in xAI, and relies in part on the data generated by the artificial intelligence company. According to Business Insider , some investors in X are really only interested in xAI, which is worth $45 billion , and its future potential. At the same time, they do so with the aim of continuing to do business with Elon Musk.

Source: https://znews.vn/tham-vong-cua-elon-musk-voi-sieu-cong-ty-100-ty-usd-post1541682.html