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Reading: The xAI–X merger is a good deal — if you’re betting on Musk’s empire
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Times Catalog > Blog > Tech > AI > The xAI–X merger is a good deal — if you’re betting on Musk’s empire
AIElon MuskNewsTech

The xAI–X merger is a good deal — if you’re betting on Musk’s empire

Usama
Last updated: April 12, 2025 8:01 pm
Usama
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8 Min Read
The xAI–X merger is a good deal — if you’re betting on Musk’s empire
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When Elon Musk revealed that his AI startup, xAI, had acquired his social media platform X (formerly Twitter) in an all-stock transaction, many observers were skeptical. Yet, on closer inspection, the deal appears to be far from irrational. xAI’s chatbot, Grok, was already embedded within X’s infrastructure. Meanwhile, X was struggling to stabilize financially, and Musk was under increasing pressure to reframe his $44 billion Twitter purchase as a strategic step—not just a spontaneous tech mogul impulse.

Contents
Musk’s Empire: One Story, Many FacesBetting on the NarrativeThe Power of the Musk EffectThe Regulatory and Ethical RisksFaith Over FundamentalsFinal Thoughts

More than anything, this merger underscores a core truth about Musk’s sprawling empire: investing in any of his ventures isn’t about short-term ROI. It’s about buying into a grander narrative — one fueled by ambition, futuristic visions, and the cult of personality surrounding Musk himself.

Musk’s Empire: One Story, Many Faces

To understand this move, it’s essential to recognize that Musk’s companies—Tesla, SpaceX, The Boring Company, Neuralink, X, and now xAI—don’t operate like conventional standalone businesses. They’re interconnected through shared personnel, capital, data, infrastructure, and, most importantly, through Musk himself.

As one investor put it, “All of Elon’s companies are already one company in spirit.” Staff often work across multiple entities, capital flows between them, and the businesses frequently collaborate. The xAI-X merger merely formalizes a relationship that has long existed in practice.

This is the essence of the “Musk Ecosystem.” Every venture Musk launches is, in some way, designed to complement or enhance the others. From space travel to brain interfaces, from AI models to electric vehicles, the businesses form an interlinked web. Musk loyalists believe that everything he touches builds upon everything else—forming an empire that is greater than the sum of its parts.

Betting on the Narrative

Critics often call Musk’s approach risky, even bordering on delusional. They cite a history of overpromising and underdelivering, of bold claims followed by years-long delays. But in today’s financial landscape, narrative-driven investing is not just tolerated—it’s thriving.

Many investors are no longer focused solely on cash flow statements or quarterly performance. Instead, they’re betting on vision, potential, and the charisma of leaders like Musk. And few can match Musk’s talent for telling a story that captivates investors, media, and fans alike.

Valuations for the xAI-X merger raised eyebrows: a staggering $33 billion valuation for X—more than triple its worth just months earlier—and an $80 billion valuation for xAI, a company with limited public revenue. But such numbers are par for the course in Musk’s world. They aren’t based on what the companies are today but what investors hope they’ll become tomorrow.

Tesla is a case in point. The automaker has long been treated like a Silicon Valley tech stock, even though it operates with the thin margins typical of car manufacturers. Investors believe Tesla will one day dominate industries like autonomous driving, AI, and robotics—and they price in that potential today.

The Power of the Musk Effect

One investment manager described Musk’s “superpower” as his ability to keep investors engaged for the long term. That loyalty translates into substantial funding for even the most ambitious ventures. Firms that have gone all-in on Musk—investing in multiple projects from Tesla to xAI—are poised to benefit the most from synergistic deals like the xAI-X merger.

In theory, combining X’s massive real-time data stream with xAI’s AI infrastructure could be game-changing. It gives xAI access to a live firehose of global user interactions, something few AI companies possess. If successful, the merger could position xAI as a dominant force in the AI space.

But with concentrated value comes concentrated risk.

The Regulatory and Ethical Risks

There are significant regulatory clouds looming over Musk’s empire. X is currently facing a lawsuit from the Securities and Exchange Commission (SEC), which accuses Musk of misleading investors by delaying the disclosure of his Twitter stock purchases—allegedly enabling him to buy at a lower price. The outcome of this case could have broader implications for investor trust and regulatory oversight.

Meanwhile, data privacy concerns are escalating. X recently updated its policies to opt all users into data collection for AI training—a quiet move that’s now under investigation by Ireland’s Data Protection Commission (DPC). Critics argue this may violate Europe’s General Data Protection Regulation (GDPR).

Another growing concern is the lack of a unified global framework for AI regulation. While the EU has taken steps with its AI Act, much of the world remains uncertain about how to govern these powerful technologies. If new laws impose constraints on data collection or model deployment, it could upend xAI’s strategy.

Finally, there’s the unpredictability of Musk himself. Investors are increasingly wary of his divided attention. Over the past year, many Tesla shareholders have expressed frustration, believing Musk has been more focused on social media politics and personal interests than on company performance.

Faith Over Fundamentals

Despite these risks, the die-hard Musk investors remain undeterred. To them, the risks are part of the deal. They believe Musk can shape markets, move capital at will, and build things that others only dream about.

This belief has tangible benefits. For example, SpaceX remains a private company, and access to its investment rounds is highly restricted. One of the only ways to get in is to already be invested in other Musk-led ventures and to be in his good graces. This strategy makes speculative investments like X or xAI not just about potential returns, but also about proximity—about staying close to the core of the Musk universe.

One investor summed it up best: “The people in these businesses aren’t blindly loyal. They’ve just gone long on Elon—and they’re staying long. To them, he’s not just wearing clothes. He’s building the wardrobe of the future.”

Final Thoughts

The xAI–X merger isn’t just a corporate acquisition—it’s a statement of intent. It’s Musk doubling down on his interconnected empire, betting that AI and data will be the twin engines powering his next wave of disruption. For some, that’s a gamble worth taking. For others, it’s a high-stakes illusion.

But whether you believe Musk is a visionary or a gambler, one thing is clear: buying into any piece of his puzzle is less about what’s on the balance sheet today—and more about believing in what might be just around the corner.

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