Elon Musk’s artificial intelligence firm, xAI, has initiated a $300 million share sale, establishing a $113 billion valuation for the company now combined with social media platform X, the Financial Times reports. This tender offer primarily allows xAI employees to sell their shares. A more substantial investment round targeting external investors is anticipated to follow, according to the report.
This strategic financial maneuver validates the valuation set during xAI’s controversial March 2025 acquisition of X. It also signals Musk’s intensified commitment to his technology ventures after a brief, reportedly contentious advisory role with the U.S. administration. Musk indicated he is now “super focused on X/xAI and Tesla” as “critical technologies” are rolling out, after stepping back from government work due to what he described as “blowback.” The current share sale aims to provide liquidity for insiders and further fuel xAI’s ambitious growth in the competitive AI sector.
The Architecture of a $113 Billion AI Powerhouse
The $113 billion figure for the merged entity, xAI Holdings Corp., was determined in March, pricing xAI at $80 billion and X at $33 billion. This followed Musk’s $44 billion acquisition of Twitter in October 2022. The consolidation, which rolled both companies into a new Texas-registered entity with Musk as president, notably bypassed traditional Wall Street oversight mechanisms like third-party valuations, due to the ownershipt structure.
A significant impetus for this merger was X’s precarious financial state, burdened by an estimated $12-13 billion in debt. Compounding these issues, X had alienated some advertisers following Musk’s changes to content moderation policies.
The merger structure allowed the struggling social media platform to leverage xAI’s rapidly appreciating value; the AI startup alone had achieved a $45 billion valuation in a late 2024 private funding round. As part of earlier arrangements, Musk had also granted investors who backed his Twitter takeover 25 percent of xAI’s shares.
Fueling xAI’s Ascent in the AI Arena
Launched in 2023 to contend with industry leaders like OpenAI, xAI quickly introduced its Grok chatbot and commenced development of its “Colossus” supercomputer cluster. The current $300 million share sale is the latest in a series of capital-raising efforts. In April XAI Holdings was exploring a massive new funding round of around $20 billion, potentially valuing the company over $120 billion.
Musk envisions a symbiotic relationship between his AI venture and the social media platform, stating that their futures are “intertwined” and that the combination “will unlock immense potential” by blending xAI’s advanced AI capabilities with X’s extensive user base and data.
To enhance Grok’s utility, xAI has rolled out features including a “Memory” feature for better conversational context, a collaborative “Grok Studio” workspace, and commercial API access for its Grok 3 models.
Strategic Alliances and Persistent Hurdles
To expand its reach, xAI has secured key partnerships. Microsoft in May added Grok 3 to its Azure AI Foundry cloud for its customers. That same month, Telegram and xAI unveiled a significant one-year deal, involving a $300 million investment from xAI into the messaging app and plans to integrate Grok for Telegram’s billion-plus users. Telegram founder Pavel Durov praised Grok by stating users would gain “access to the best AI technology on the market.”
Despite these strategic moves, xAI faces ongoing challenges. The X platform remains under regulatory scrutiny in the European Union regarding compliance with the Digital Services Act.
Furthermore, xAI is navigating a trademark dispute over the “Grok” name with AI startup Bizly, whose founder Ron Shah registered a patent for “Grok” years back who says xAI.
Grok itself has generated controversy for its sometimes erratic voice mode outputs and past allegations of politically biased content filtering. Incidents such as an inadvertent private API key leak in early May and ethical concerns regarding the use of a customized Grok version by Musk’s government advisory team also highlight operational and reputational risks.
