- Many people thought Elon Musk’s $44 billion offer to buy Twitter was too high.
- But the social media site has helped Musk get close to people in the Trump government.
- Twitter, which is now called X, has also been a great source of data for Musk’s $50 billion company xAI.
People thought it was one of the worst tech deals ever when Elon Musk paid $44 billion for Twitter. After two years, an election, and a boom in creative AI, it seems like a better deal now.
Wedbush Securities tech analyst Dan Ives said soon after the deal finished in October 2022 that it would “go down as one of the most overpaid tech acquisitions in the history of M&A deals on the Street.”
Musk borrowed $13 billion to buy Twitter, which is now called X. This deal has turned out to be the worst merger financing deal for banks since the 2008 financial crisis.
Despite this, the deal has been very good for Musk. He has a lot of power in the new Trump government because he used X to support the reelection of the former president.
Not only has X been Musk’s political megaphone, but it’s also been a good source of training data for one of the billionaire’s other businesses, xAI, a startup that has become worth $50 billion in just 16 months.
With this new price, xAI has gone above and beyond Musk’s offer to buy X. The Wall Street Journal said that the Qatar Investment Authority and Sequoia Capital helped pay the $5 billion round.
Musk started xAI in July 2023 as a way to get into the AI race. He had previously co-founded OpenAI but left it because he didn’t agree with its CEO, Sam Altman.
By using X as a source of third-party data, one of the most important ways to train big language models, the startup has gained a lot of ground on its competitors.
Musk stopped other groups from freely scraping X data in late 2023, but xAI could still get to it. That was very helpful for xAI.
An intellectual property lawyer at EIP called Ellen Keenan O’Malley told Parhlo World that xAI’s ability to access “third-party information through X is the potential kryptonite to ChatGPT’s edge” and could be one reason why Musk’s startup is becoming more valuable.
Musk says that as of May, 600 million people were using X every month, even though the number of users has been going down.
“This is a level that neither OpenAI nor any other third party can access, or at least not as easily, which provides a huge competitive edge and therefore makes xAI a valuable company,” said O’Malley.
Wired noted before that getting access to 0.3% of X’s data costs about $500,000 a year, which keeps many people from getting it.
“It’s clear that data from X or any social media platform is valuable,” said Advika Jalan, head of research at MMC Ventures.
X Marks The Spot In The Deal Between Musk And Trump
Musk set up a political action group to help Trump’s campaign and spent at least $119 million on it.
X was also very important. Musk has been a big poster on X for a long time, but during the election, he put up a lot more. The Economicist looked at Musk’s political posts on X and found that they have grown from less than 4% in 2016 to over 13% this year. Because he backed Trump, has written more than 100 times some days to his more than 200 million followers.
Queensland University of Technology released a study this month that said Musk may have changed X’s algorithm to help his and other accounts that lean Republican reach more people.
According to Shmuel Chafets, cofounder of venture capital firm Target Global, “X has become a powerful tool” in Musk’s ecosystem. He also said that it works “as a platform for promotion and influence, similar to how Warren Buffett leverages the Berkshire Hathaway annual shareholders meeting and his shareholder letters.”
X didn’t always look like it would have so much power in Musk’s hands.
A revolt by advertisers over content moderation followed Musk’s takeover in the months and years that followed. The company fired about 80% of its staff, and users were inconvenienced by service failures.
Since then, Musk’s co-investors have been taking less money out of their X stakes. In September, one of its investors, Fidelity, cut the value of its stake by a lot, which made X seem worth $9.4 billion.
Even so, Musk’s support for Trump—which came after an attempt on Trump’s life at an event in Pennsylvania in July—gives the tech billionaire a lot of political power that is hard to value.
Trump called Musk a “super genius” in his victory speech at the Mar-a-Lago resort in Palm Beach. The president-elect chose Musk and Vivek Ramaswamy, who ran for the Republican primary in 2024, to run a new Department of Government Efficiency together.
DOGE will be a “threat to bureaucracy,” according to Musk. As head of the new department, he will be responsible for cutting $2 trillion in government spending and getting rid of rules that he thinks are unnecessary and getting in the way of his corporations. Reuters quoted a SpaceX source as saying that Musk “sees the Trump administration as the vehicle for getting rid of as many regulations as he can, so he can do whatever he wants, as fast as he wants.”
Since Trump won the election, the billionaire has been seen at a UFC fight night with the president-elect. He has also been seen on calls with leaders like Volodymyr Zelensky and Sundar Pichai, CEO of Google.
X-odus
We don’t know how long X will keep up the Musk-Trump friendship and help xAI grow.
Musk, for example, doesn’t always get the cabinet appointments he wants. For example, Trump picked Scott Bessent over Musk’s choice of Wall Street veteran Howard Lutnick as Treasury secretary, which Musk saw as a “business-as-usual choice.”
X is also facing legal problems because courts are worried about how they handle user data. In May, X sued the Israeli company Bright Data, but a federal judge in California threw out the case. The company X said that Bright Data was “using complex technical measures to get around X Corp.’s anti-scraping technology.”
This month, X brought back some of its lawsuit against Bright Data. If X fails, it would make people wonder how useful the X to xAI data chain really is.
In other news, the renewed interest in X competitors like Bluesky and Threads could cause Musk’s social media site to lose users who are important for advertising income and for xAI’s training of future models. The current state of X is such that “lots of people hate it because they see it as being a weaponized instrument of MAGA,” Calum Chace, cofounder of AI startup Conscium, told BI.
But for now, Musk has X, which is a very useful tool.
“Critics may enjoy pointing out his missteps, but Musk’s ability to leverage X for both personal and business purposes reinforces his reputation as a visionary entrepreneur who consistently thinks several steps ahead of his contemporaries,” Chafets said.
Also Read: Donald Trump and Elon Musk’s X Spaces Show Fails
“Ultimately, this deal could prove highly lucrative if he decides to sell or take the company public in the future.”
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