How Musk Is Using AI Startup To Help Boost X

"When Elon Musk created his artificial-intelligence startup xAI last year, he said its researchers would work on existential problems like understanding the nature of the universe. Musk is also using xAI to pursue a more worldly goal: joining forces with his social-media company X.

The AI company, for example, says it has an advantage of having access to X's trove of posts. And xAI's flagship product, the chatbot Grok, is available only to users who pay for a subscription on X. The result is that, in the seven months since xAI publicly launched, X and xAI are increasingly intertwined. Their ties offer insight into how Musk is betting on AI efforts as a key part of his aim to help turn around X's business and transform X into an "everything app."

With X and xAI, Musk is drawing on overlapping financial backers, technology and data to help jump-start the AI company and bring X closer to the app that he envisions, which would offer messaging, digital banking, video entertainment and more, all while being what he has called the global town square for mostly unfiltered communication.

"We know the future of social platforms will be meaningfully impacted by generative AI," whether positively or negatively depending on how it is deployed, said Daniel Newman, a technology analyst who is chief executive at The Futurum Group. "Elon Musk sees xAI as the catalyst to infuse generative AI while maintaining his focus on the platform being less censored," Newman said.

X Chief Executive Linda Yaccarino has pointed to Grok as a key ingredient for turning X into what she calls the everything app. "Imagine @grok as a concierge for all businesses!" she said in January, part of a post in which she laid out big themes for X including AI, freedom of speech and video content.

Musk has also said there are financial ties. He tweeted last fall that "X Corp. investors will own 25% of xAI." While his post didn't provide additional details, some corporate-law experts said that since xAI says its chatbot gets real-time information from X's platform, it would be expected that X investors would get something in return.

Working closely with xAI might also add a shine to X. A boom in generative AI is a bright spot in tech, and a draw for money and talent in Silicon Valley. X faces a difficult financial picture -- Musk's takeover deal loaded the company with a heavy debt burden, and ad revenues plunged after content-moderation controversies.

Musk has a history of tapping his array of companies to help each other out. Sometimes that has raised questions from investors. In his first days running Twitter, Musk brought in Tesla employees to review Twitter's engineering talent. A Boring Co. test tunnel unveiled in 2018 was constructed partly with the help of SpaceX employees.

Musk launched xAI last year, after accusing big AI developers including OpenAI of consolidating too much power and being too politically correct. (Musk helped found OpenAI but later left after a power struggle.)

Musk saw opportunities for synergy between X and xAI soon after buying the platform then called Twitter. He initially planned to incubate his AI startup by housing some early employees within Twitter, according to Walter Isaacson's biography of Musk.

Musk ultimately said it was necessary to turn xAI into a new startup because talented engineers would be more interested in joining a startup rather than an established company. That might also be a more attractive setup for any potential investors in xAI, said Brian Quinn, a Boston College corporate-law professor.

Last year, X launched a "see similar posts" button, which the company said is "powered by xAI." Engineers are continuing to work on features using xAI's technology. Musk said recently that Grok 1.5 is forthcoming and will include a feature that can analyze and summarize posts on X. He also said Grok should have a button for helping users write posts.

XAI employees have at times been working out of the longtime Twitter headquarters building in downtown San Francisco, gathering on the floor above where many X employees work, according to people familiar with the operations.

Some X employees are voicing optimism about X's collaborations with xAI. "My guess is that Grok is highly underutilized," Alexa Alianiello, who works in sales and partnerships at X, tweeted recently. "It's worth putting up with the sass for the unparalleled breakdown of what's happening."

X has been trying to grow its subscription business by offering paying users features including Grok, verification and fewer ads. The subscription tier that includes Grok starts at $16 monthly. X hasn't publicly disclosed subscriber numbers.

Outside estimates indicate that while the platform's subscription business has grown since Musk's takeover, those revenues remain relatively small compared with how much the platform has historically made from advertising.

The creation of xAI adds to an already full plate for Musk, who now oversees six companies. It has also added to questions and concerns among some investors in Tesla about the breadth of Musk's business obligations and his ability to focus on the electric automaker.

Musk has said he thinks xAI will add value to Tesla, and xAI says on its website that it will work closely with Tesla as well as X and "other companies."" [1]

1. EXCHANGE --- How Musk Is Using AI Startup To Help Boost X. Corse, Alexa.  Wall Street Journal, Eastern edition; New York, N.Y.. 02 Mar 2024: B.9.