Critics say Musk ‘paid too much’ for Twitter. Thanks to Trump and xAI, it could even be a bargain.

• Elon Musk’s $44 billion Twitter buyout was seen by many as too expensive.

• However, the social media platform has helped Musk gain close access to the Trump administration.

• Twitter, now X, has also been a valuable data source for Musk’s $50 billion startup xAI.

When Elon Musk bought Twitter for $44 billion, it was labeled one of the worst technology acquisitions in history. Two years, elections and a generative AI boom later, it’s starting to look like a bargain.

Shortly after the deal closed in October 2022, Wedbush Securities tech analyst Dan Ives said it would “go down as one of the most overpaid technology acquisitions in the history of Street M&A.”

On paper, the $13 billion Musk borrowed to buy Twitter, now X, has become the worst bank merger financing deal since the 2008 financial crisis.

Still, the deal has brought significant benefits to Musk. He now wields significant influence in the incoming Trump administration after using X to lend his support to the former president’s re-election.

Not only has X served as Musk’s political megaphone, but it has also been a lucrative source of training data for one of the billionaire’s other ventures: has increased.

That new valuation means xAI has surpassed Musk’s purchase price for X. It came up with a $5 billion funding round, which The Wall Street Journal reported was backed by the Qatar Investment Authority and Sequoia Capital.

Musk launched xAI in July 2023 as a springboard to join the AI ​​race after co-founding and then leaving ChatGPT maker OpenAI over disagreements with its CEO, Sam Altman.

The startup has significantly caught up to its rivals by using X as a source of third-party data, one of the main ways to train large language models.

At the end of 2023, Musk blocked other organizations from collecting X data for free, but allowed xAI access. That gave xAI a crucial boost.

Ellen Keenan O’Malley, a senior associate at intellectual property law firm EIP, told Business Insider that xAI’s access to “third-party information through Musk’s startup.

Although the number of X users has declined, it had 600 million monthly active users in May, according to Musk.

“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 advantage and therefore makes xAI a valuable business,” O’Malley said.

Access to 0.3% of X’s data costs about $500,000 annually, which is much more expensive, Wired previously reported.

“It’s clear that the data from X or any other platform is valuable,” Advika Jalan, head of research at MMC Ventures, told BI.

X marks the spot the Musk-Trump alliance

Musk has spent at least $119 million on a political action committee to support Trump’s campaign.

X also played a big role. Musk has long been an avid poster of X, but he has turned up the volume during the election cycle. Analysis by The Economist shows that the share of Musk’s political messages on X has risen from less than 4% in 2016 to more than 13% this year. Since endorsing Trump, he has posted more than 100 times some days to his more than 200 million followers.

A study published this month by the Queensland University of Technology suggested that Musk may have tweaked X’s algorithm to increase the reach of his and other Republican accounts.

Shmuel Chafets, co-founder of venture capital firm Target Global, told Business Insider that “X has become a powerful tool” in Musk’s ecosystem, adding that it serves “as a platform for promotion and influence, similar to the way Warren Buffett takes advantage of the annual Berkshire Hathaway scholarship. shareholders’ meeting and its shareholder letters.”

X didn’t always seem destined to gain such influence in Musk’s hands.

In the months and years following Musk’s takeover, there was an advertiser revolt over content moderation concerns, the company laid off about 80% of its staff, and service outages disrupted users.

Musk’s co-investors have written down the value of their X stakes over the past two years. In September, Fidelity, one of its investors, reduced the value of its stake, giving X an implied valuation of $9.4 billion.

Still, Musk’s support for Trump, which came after an assassination attempt on the president-elect during a rally in Pennsylvania in July, gives the tech billionaire political influence that is difficult to put a price on.

Musk, who Trump said was a “super genius” in his victory speech at the Mar-a-Lago resort in Palm Beach, was selected by the president-elect to lead a new Department of Government Efficiency alongside Vivek Ramaswamy, who headed to the government. 2024 Republican primaries.

DOGE will be a “threat to the bureaucracy,” said Musk, whose duties at the newly formed department will include pushing through $2 trillion in federal cuts and rolling back regulations he considers unnecessary and in the way of his business empire . As one SpaceX official told Reuters, Musk “sees the Trump administration as the vehicle to eliminate as much regulation as possible so he can do what he wants as quickly as he wants.”

Since Trump’s election victory, the billionaire has been seen side by side with the newly elected president at a UFC fight night, reportedly joining his calls for leaders like Volodymyr Zelensky and Google CEO Sundar Pichai.

X-odus

How long X maintains a Musk-Trump bromance and supports xAI’s growth remains to be seen.

For example, Musk does not always get his preference for Trump’s chosen cabinet appointments; his choice of Wall Street veteran Howard Lutnick as Treasury secretary was shunned in favor of Trump’s choice of Scott Bessent, who was dismissed by Musk as a ‘business-as-usual choice’.

X is also facing legal challenges where judges have raised concerns about user gatekeeping data. In May, a federal judge in California dismissed a lawsuit X filed against Israeli company Bright Data. X alleged that Bright Data used “extensive technical measures to circumvent X Corp.’s anti-scraping technology.”

Earlier this month, X partially revived the lawsuit against Bright Data. Should X not be successful, this would raise questions about the value of the data pipeline X to xAI.

Elsewhere, renewed interest in X is now in a position where “a lot of people hate it because they see it as a weaponized tool of MAGA,” Calum Chace, co-founder of AI startup Conscium, told BI.

But for now, Musk has a powerful tool in his hands with X.

“Critics may enjoy pointing out his missteps, but Musk’s ability to leverage .

“Ultimately, this deal could be very lucrative if he decides to sell or take the company public in the future.”

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