The announcement that Xai was acquiring X came as a surprise to many.  It was an all stock transaction with the shareholders in X gaining stake in Xai.  This is not a big deal as both are private companies and we are likely dealing with 50 or 75 shareholders in each.  In fact, there are many who invested in both.

What is important about this transaction is we are not seeing X acquire Xai.  This is very telling with regards to value and where it is being directed.

It is a lesson for all looking at the Web 3.0 realm.  Understanding the changing landscape and where value is derived is crucial.  One of the biggest advantages is to determine where to focus first.

In this article we will dig into this a bit to see if we can uncover some pathways to consider.

 https://img.leopedia.io/DQmYuUubRviQ4f9G53XwKTkaf1WyZ43SF7gGa6YMftDLihY/image.png 
<center> [Source](https://nypost.com/2025/03/28/business/elon-musks-xai-buys-social-media-platform-x-for-45b-futures-are-intertwined/) </center>

# What The Xai And X Merger Tell Us About Future Value

I think the basis starts with the debt.  There was $13 billion on the balance sheet of X.  With a valuation of around $44 billion, this is a significant amount.

In contrast, the value of Xai is placed at around $80 billion.  This means it is a smaller percentage of the total.

Hence, we can look at this from the financial perspective to understand it better.

My sense, however, is we have more to this story than simply finance.  We can see technological reasons for it.

## Valuation Bubble?

Many claim that AI is in a bubble.  Unfortunately, this is something that was stated for a while and there appears no sign this is accurate.  Markets can become stretched for extended periods.

We saw this during the DotCom bubble.  At that time, a lot of nonsense was pushed to absurd levels.  Yahoo at $475 was an example.  

That said, we have to understand what happened.  Major value was generated by Internet companies.  Today, they are some of the largest in the world by market cap.  Amazon and Google are two early companies.  

Is there the possibility that some companies are being overvalued?  Certainly.  This does not mean it is a bubble.  More importantly, the leaders in the race are Big Tech, ones that have a foundation in place.

Specifically, this means social media platforms.  Google, X, and Meta all excel in this area.   For this reason, there is a natural marriage between AI and social media.  I think most will agree with this assessment based upon how things are unfolding.

All platforms are adding AI tools and services.

## Xai And X 

The combining of these two entities makes sense.  Both had a close relationships before this took place.  The problem is the accounting between the two firms had to be a nightmare.  X was using Xai's product (Grok), which was trained on the data from X.

If the value resides with the AI company, what does that mean for the social media platform?  In my mind, here is where the lesson enters.

X is nothing more than a feeder system for data.  It has the users, something that Xai needed.   Each day, hundreds of millions post, provided Xai with up-to-the-moment information.  

This is a topic we covered a fair bit over the past year.  However, it is playing out in real time based upon the Xai deal.  I do not think it is an accident that Xai is the one acquiring X especially since reports are the latter is profitable while Xai is still dependent upon fundraising.

## Web 3.0: AI Powered

Web 3.0 is going to be AI powered.  This is what the next generation of the Internet will be like.  We are going to see the impact of generative AI spreading to all corners over the next few years.  

For this reason, developers need to take this into account.  Anyone who is setting up a game, platform, application, or site without thinking about how to integrate AI will be lost.  They will not gain any traction.

A social media application without AI is akin to one without the ability to upload images or video.  There was a time when websites were text only.  Those days, however, are long gone.  Few message boards from the 1990s still exist, let alone excel.

This will be the case in a few years regarding AI.  Sites that do not have this as standard will be missing out.

The value driver is becoming clear.  Even if some valuations are absurd (bubble), the overall impact cannot be denied.

Xai just proved what we have been saying.  It is time for Web 3.0 to wake up to this face.



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