Elon Musk, the billionaire tech mogul, has found himself at the center of controversy, following his decision to sell social media platform X to his own AI venture, xAI. This sale occurs amid an ongoing fraud lawsuit related to delayed disclosure of Musk’s initial investment in the social media platform. The lawsuit accuses Musk of defrauding former Twitter shareholders, with this new ownership transfer potentially making the legal matter “a whole lot spicier”, as noted by Cinneamhain Ventures partner Adam Cochran.
The sale, announced on March 28, coincided with the rejection of Musk’s bid to dismiss the lawsuit by a US judge. Cochran suggested that the acquisition could expose his AI entity to more complications, especially considering the high valuation of xAI.
Musk values xAI and X at $80 billion and $33 billion respectively, also mentioning the carryover of $12 billion in debt from the latter’s previous valuation. Musk originally bought this platform, which was known as Twitter at the time, for around $44 billion in April 2022. The combination of the two firms, Musk suggests, will provide a significant boost to the data, talent, and overarching potential of xAI.
Despite Musk’s positive perspectives on the merger, critics suggest that this move takes advantage of the high valuation of xAI’s stock to acquire X at multiple times its value, leading to a potential loss of $11 billion. They further claim that the move could disadvantage xAI and X investors if user data is sold to xAI.
xAI’s flagship product is an AI chatbot “Grok,” which has been built into the X platform. Despite accusations that its $80 billion valuation is excessive, supporters believe Grok has the potential to be a leading model for various tasks, validating its high price. Musk has previously indicated that his motive behind creating Grok was to build AI tools capable of aiding humanity by stimulating research and innovation.