A new star in the AI constellation

The acquisition by Elon Musk's xAI of X for $33 bn, a deal announced last week, reinforces the symbiotic relationship between social media and AI. A unified structure that trains AI models on user-generated content to deliver synthetic content on a large delivery platform closes a profitable loop. X has been struggling with a flight of advertising dollars since content curation was relaxed when Musk bought it. xAI needs data to train its chatbot Grok, and the fancy valuation of the company will spread cheer among Musk's co-investors in X. The combination of media and generative AI shortens the path to profitability for both, with tech making it possible to target content and advertising far more precisely. This is an obvious benefit Mark Zuckerberg's Meta is exploiting on its social media platforms, Facebook and Instagram.

Musk is gatecrashing the media and AI parties. He must catch up with Microsoft-backed OpenAI-which xAI bid for unsuccessfully-as well as spiffy Chinese startups that are raining on Silicon Valley's AI parade. AI is key to Musk's vision of battery-powered, driverless Tesla cars. It's just that the world's richest man isn't pushing the tech frontiers anymore. BYD, a Chinese rival, is outselling Teslas by stuffing its cars with automation and recharging their batteries in minutes. Musk's vision for Tesla, the world's most fancied automobile company, seems to be slipping away as rivals in the US and China overtake it in driverless travel. Profits from Starlink, Musk's venture to shroud the world with internet connectivity, are questionable if the cost of placing a global constellation of communications satellites is factored in.

Musk has managed to fold X's troubles into the unstoppable investor appetite for AI. He has a bigger battle on his hands, convincing investors he is gaining AI superiority so that they remain invested in Tesla. It doesn't help that Musk's sojourn in Washington is denting customer and investor loyalty for Tesla cars.