The News
Elon Musk’s move to combine the social media company X with his xAI puts an official corporate stamp on a de facto combination in which both companies already shared talent and resources in a drive to catch up in the hypercompetitive AI industry.
The all-stock deal valued the firehose of conversation once known as Twitter at $45 billion, and the maker of the chatbot Grok at $80 billion, Musk announced on X. The transaction effectively turns anyone who invested in Musk’s bid for Twitter (it later changed its name), into a shareholder of xAI, which will use the social media company’s data for training AI models and as a distribution pipeline for Grok.
“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,” Musk wrote on X.
In this article:
Reed’s view
I wrote in Sept. that Musk’s empire of companies could be looked at as a giant AI conglomerate with components all working to benefit each other.
X is a vital source of training data for xAI and it provides a consumer distribution channel. On that front, it makes it one of a small handful of foundation model companies with widely used consumer-facing products. While Grok performs well on some benchmarks, it still lags behind OpenAI, Anthropic and Google in state-of-the-art models. Musk says he is determined to make xAI the leading AI company.
Data is one of the most important resources in the AI race, and xAI now has a pipeline coming directly from X. The challenge for X is to find ways to gather more video data, as the future of AI models appears to be multimodal. (Google, with all of its properties and consumer reach, has an advantage there.)
But there’s another company in Musk’s empire with a data source even more valuable than X’s: Tesla. There were about five million Teslas on the road as of last year, all acting as multimodal data gathering robots.
That data could serve as valuable training data for future foundation models. And those models could help power Tesla’s autonomous driving technology, which is now using a transformer-based architecture — just like ChatGPT — for the Full Self Driving feature.
Tesla is also trying to build humanoid robots, an effort that could produce and require more video data for training.
Like past Musk transactions, such as Tesla’s acquisition of SolarCity, this move will likely draw scrutiny from those who believe Musk is acting unethically. But Musk’s shareholders don’t see it that way. People invest in Musk’s companies because they believe in his vision and the acquisition just removes another obstacle.
At some point, it will make sense for Tesla to acquire xAI — but given the scale of the publicly traded Tesla, that will be a lot more complicated.
Room for Disagreement
The New York Times’ Mike Isaac was critical of the deal: “cash-suck business propped up by rabid AI investment fervor absorbs other weak business that was valued at a fraction of its acquisition price until the owner became defacto POTUS. Numbers are all basically made up by investors who are desperate to get in the rounds,” he wrote.