Kurt Wagner and Katie Roof March 31, 2025 Why do this deal? Posts from Musk and other X or xAI shareholders this week praised the merger, citing the ways both companies will help one another. People have mostly focused on the proprietary dataset that xAI will have via X and its billions of user posts. It also gives xAI total control over that dataset and means the company can refuse to license that data to any other artificial intelligence competitors. X, meanwhile, can help xAI distribute its Grok chatbot and other products to millions of consumers. The problem with this logic, though, is that all these purported benefits were seemingly already in place. XAI has been using the social network’s data to train Grok for well over a year, and Musk has been pitching Grok to users on X — and selling advanced versions of the product to X users via its premium subscription. Given Musk’s role running both companies, there should have been no reason to worry any of those benefits were in jeopardy, or that X would suddenly start working with an xAI competitor. What is the real value of X and xAI? Musk says the deal values X at $33 billion, not including $12 billion in debt. He also said it values xAI at $80 billion. This is a deal in which Musk is buying one of his private companies with another one of his private companies, both of which were represented by the same bank, Morgan Stanley. This unique arrangement means that Musk could theoretically assign any value he wants to X and xAI, so long as none of the investors revolted. It doesn’t seem like a coincidence that xAI purchased X for roughly the same amount Musk paid for it in October 2022, which means that X investors are simply shifting their stakes from one company to another. It’s also interesting that xAI’s most recent valuation before the deal was about $50 billion, but now the company is valued at $80 billion even though there was no new financing involved in the transaction, according to a person familiar with the arrangement. Musk, it seems, increased the value as part of the acquisition. A spokesperson for X declined to comment on details of the deal when it was announced. Who will run XAI Holdings? One of the deal’s biggest cheerleaders last week was X Chief Executive Officer Linda Yaccarino, who posted, “The future could not be brighter.” It’s less clear what the merger means for her future atop the company. Musk didn’t announce any kind of corporate structure for XAI Holdings, and it’s not known who will run the new joint entity, though Musk himself seems the most likely choice. It’s possible Yaccarino stays on to continue running X as a business unit within the new company, but mergers are often messy and can require significant role changes. We’ll have to wait and see how much more tightly Musk merges the operations of X and xAI to better understand how things will be run. How will this change X’s social networking product? It’s not immediately known how this acquisition will affect X, if at all, in part because the two businesses have long been deeply intertwined. Grok is already available on X, for example, and users can pay extra for premium features associated with the AI chatbot. It seems likely there will be even more Grok integration into X as time goes on, including tools like photo editing or a voice assistant. Still, this was already likely to happen given the direction Musk was headed with the two businesses. Advertisement