'X' Marks xAI's Spot
In the end, there were really only two potential outcomes for Xitter – the artist formally known as Twitter.1 First, it could go public once again. And actually, surprisingly, there was a rather strong case for that to happen – not really based on fundamentals, more so on comps and one other thing (more on this in a second) – and I made that case last week. The other: for xAI to acquired Xitter.
As someone once said, the most entertaining outcome is the most likely:
@xAI has acquired @X in an all-stock transaction. The combination values xAI at $80 billion and X at $33 billion ($45B less $12B debt).
I should have known this was the more likely outcome... I predicted it four months ago:
The writing has been on the wall for a while now that this is how Musk would make those who backed the takeover of Twitter, whole. But given the speed at which the massive AI startups are raising, xAI is now already valued higher than Twitter ever was – $50B vs. $44B when Musk made the deal. And with a potential $75B deal on the horizon, it won't be long before that 25% stake in xAI is worth more than Xitter itself is currently. Then the question becomes: at what point does xAI reverse-merge with Xitter to takeover the 'X' name and clean up the cap table?
...and five months ago:
xAI at $40B? Nearly double in just a few months? Sure, why not. Notably, we're quickly approaching the price that Elon Musk paid for Twitter. Whereas once upon a time I thought that Tesla would be the company that unified all the various Elon interests, I'm increasingly thinking it will be xAI, which will undoubtedly subsume the 'X' branding if that happens...
...and yes, seven months ago:
When people ask what the likely outcome is for Xitter, it increasingly feels like there will be some sort of Solar City-to-Tesla-type deal. Maybe even xAI acquires it, using data as the rationale, if they can boost that valuation high enough? Or Xitter "hackquires" xAI if the AI hype cycle fades? If you bet on one Elon company, you may end up betting on all Elon companies.
I'm mainly annoyed I didn't include it in my 2025 predictions. Since, you know, I kept predicting it. Oh well. You can't be right all the time. Or can you?
Anyway, now xAI/Xitter – undoubtedly soon to fully subsume the 'X' branding – is worth ~$105B on paper,2 at least according to Musk. (And, I'd just note that I was also correct in my analysis of Xitter's "real" valuation here, beyond the headlines last week stating that the company had again hit the purchase price number, without factoring in – or rather, out – the debt, as Musk confirms.3)
This will make Xitter's investors fully whole on paper and will also allow them to let their money "ride" in this new combination (since it's an all-stock deal). A combination which fully formalizes xAI's unique real-time dataset:
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. The combined company will deliver smarter, more meaningful experiences to billions of people while staying true to our core mission of seeking truth and advancing knowledge. This will allow us to build a platform that doesn’t just reflect the world but actively accelerates human progress.
My only other quick reaction here is if this won't harm the actual prospects for Xitter further, with many now explicitly knowing it's main purpose is the feed the AI beast? Maybe people won't care. But maybe they will... We'll see!
One more thing: I think this makes it more likely that Microsoft pushes again to buy TikTok. Another one of those pesky predictions...
1 Which I still refuse to call 'X' but now may not have to -- the entire thing should be called 'X', right? A holding company, that will soon undoubtedly include payments as well. Though I'm not sure what you name X/Twitter in that scenario...
2 My math is basically $80B + ($33B - $8B) since Xitter's stated valuation is $33B (ex-debt) but that's inclusive of the ~10% stake in xAI that Xitter owned before the deal, so I subtracted out that $8B.
3 I'd just note that this also means Xitter's "terminal" value (as a stand-alone entity) ended up being around $32.5B ($45B minus the $12B debt minus the $400M or so of reported cash on hand). But, if you also remove the reported 10% stake Xitter was given in xAI, that takes the "true" end value of Xitter as the stand-alone business to just under $25B. A far cry from the $44B paid, of course.