Elon Musk Sells X to xAI Amid Lawsuit Controversy Sparking Crypto and Tech Debate

• Elon Musk finalizes an all-stock deal transferring X (formerly Twitter) to his AI startup, xAI, valued at $80B, amid ongoing legal challenges.
• The deal comes just after a judge rejected Musk’s attempt to dismiss a lawsuit claiming he misled Twitter shareholders about the platform’s value.
• Musk’s AI chatbot, Grok, integrated with X, faces skepticism over its $80B valuation but holds promise for future AI innovations.

Billionaire businessman Elon Musk has officially transferred the ownership of his social media business X (formerly Twitter) to his artificial intelligence startup, xAI. The deal, which closed on March 28, has raised controversy due to the timing coinciding with the same moment a U.S. judge decided to reject Musk’s motion to have a lawsuit alleging he defrauded former Twitter shareholders dismissed.

The lawsuit is a result of accusations that Musk intentionally delayed the disclosure of his initial investment in Twitter, which could have misled shareholders on the true state of the platform’s value. The class-action lawsuit had been a dark cloud over his Twitter ownership, and now, with xAI acquiring ownership of X, the case has taken on a whole new dimension of interest.

As Adam Cochran, a partner at Cinneamhain Ventures, pointed out in a March 28 X post, the situation just got “a whole lot spicier.” In Cochran’s view, the move exposes xAI to possible legal repercussions, rendering it a much larger “pie” of possible liabilities. The twist means that Musk’s AI company can now find itself at the focal point of a high-profile legal battle, one which could damage the company’s reputation and potential.

Elon Musk’s $80B xAI Acquisition of X Explained

Musk’s announcement of the deal on X disclosed that xAI had purchased the platform in an all-stock deal, with the transaction valuing xAI at a staggering $80 billion and X at $33 billion, including $12 billion of debt from X’s original $45 billion valuation. Elon Musk had initially purchased X (then Twitter) for approximately $44 billion in April 2022. In his announcement, Musk highlighted the strategic synergy between xAI and X, stating, “xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution, and talent.

Elon Musk said, “This merger will unlock immense potential by bringing xAI’s state-of-the-art AI capability and talent together with X’s vast reach. This will allow us to build a platform that doesn’t just reflect the world but actually drives human progress.

However, not everybody is sold on Musk’s grand vision. Cochran criticized the deal, arguing that Elon Musk had used inflated xAI stock to pay multiple times over for X and was still losing $11 billion on the deal. Cochran speculated that Musk may have made the acquisition to make money off X’s valuable user data, which would be a potential source of significant revenue for xAI in the future. This alarmed both X investors and xAI investors, suggesting that the deal may not be as wonderful as it appears on the surface.

At the heart of this transaction is xAI’s signature AI chatbot, Grok, which is integrated into the X platform. Grok, unveiled in November 2023, has been generating a buzz for its quality performance, with Musk stating that it would beat OpenAI’s early version of ChatGPT in academic testing. Musk’s goal with Grok, according to his statements at the time, was to create AI tools that would “empower research and innovation,” with the ultimate aim of benefiting humanity.

Elon Musk’s xAI Merger and Grok’s $80B Potential

Whereas some critics, including Cochran, have referred to Grok’s $80 billion valuation as “insanely dumb,” there are others who believe there is potential in the model. Crypto developer Keef, for one, disagreed that Cochran’s judgment was fair, pointing out that while the deal may be shady, Grok’s functionality could possibly make it a world-class AI model for a variety of tasks.

As Musk proceeds with the merger of xAI and X, the broader implications of this purchase are uncertain. Will xAI’s new acquisition unlock the whole promise of AI technology, or will it unleash additional legal and financial headaches for Musk’s corporate empire? Only time will tell, but the controversy surrounding this transaction has added one more layer of complexity to an already volatile landscape in the tech and crypto world.

For now, the world is watching closely as Musk’s AI ambitions continue to evolve, and the legal battle over his past dealings with X may shape the future of both the platform and the broader AI landscape.

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