Generally self-dealing could be spun as ingenuity. on March 28, Elon Musk announced that his synthetic intelligence firm, xAI, had acquired his flailing social media platform, X, in an all-stock transaction. Musk mentioned that the newly mixed entity, below the company title x.AI Holdings Corp, was valued at $113 billion.
Smashing collectively two of his corporations like a child taking part in with Foolish Putty and hoping one thing good emerges is a go-to transfer for Musk. In 2016, he oversaw the sale of his inexperienced vitality concern, SolarCity, which was based by his cousins, to Tesla, his electrical automobile firm. Musk has develop into identified for a type of round economics—what’s been referred to as the “Muskonomy.” As Axios’s Scott Rosenberg wrote after the X-xAI deal, “these {dollars} are all simply circling the Musk-o-sphere in a barely completely different configuration.” Whether or not it’s promoting carbon credit or stashing Bitcoin on the corporate stability sheet, monetary engineering has proved enormously useful to Musk and to many different rich-but-overstretched start-up CEOs. Musk has made it a high-wire act.
With x.AI Holdings, Musk could possibly resolve—or conceal—a number of issues without delay. Chief amongst them: Musk’s high-profile marketing campaign to accumulate Twitter and remodel it into the hate-promoting X platform might have elevated his political profile, however it got here at a serious value to his funds and repute. He bought Twitter at an inflated worth of $44 billion, with a big debt burden hooked up, after which proceeded to destroy the corporate’s income base. Its core advert enterprise nonetheless hasn’t recovered. What was as soon as a strong going concern grew to become a totally distressed asset, which has failed to exploit sufficient cash from Musk’s right-wing base by means of subscription charges. In taking up X, xAI conveniently bailed out Musk’s sad X traders by turning them into shareholders of his red-hot AI startup. It was additionally an opportunity to win again at the very least a number of the waning favor of X’s secure of sovereign wealth traders.
Earlier than the merger, xAI’s valuation was hovering—however like most different AI start-ups, it was additionally a cash pit, devouring billions of {dollars} for knowledge facilities, vitality, and top-of-the-line Nvidia chips. With each multibillion-dollar name for recent financing—xAI raised $12 billion in two rounds in 2024—the corporate grew to become extra priceless on paper and garnered extra favorable protection within the tech press. However its burn price was so excessive that whilst the most recent funding spherical closed, the subsequent one was already gearing up.
On June 30, 2025, Morgan Stanley announced that it had helped elevate $10 billion in debt and fairness for xAI. Two weeks later, The Wall Road Journal reported that SpaceX, Musk’s privately held rocket firm, had agreed to take a position $2 billion in xAI, and Musk mentioned that Tesla shareholders would have the ability to vote to do the identical. The day earlier than that, experiences had surfaced that xAI was set for yet one more fundraising spherical that will worth the corporate as excessive as $200 billion, with Saudi Arabia’s sovereign wealth fund set to steer the spherical, constructing on its $800 million xAI stake. Musk was now planning to double the brand new firm’s assessed worth in lower than 4 months. The Muskonomy was booming.
To lift cash for his corporations, Musk has steadily turned to the identical set of traders, a few of whom appear to assume that entry to Musk and the ability he holds could also be extra vital than producing regular monetary returns. There’s no different cause why his traders would bankroll one thing just like the Boring Firm, Musk’s extremely touted initiative to put in high-speed tunnels in main cities, which has been a near-full bust. So if Musk’s monetary backers aren’t anticipating most quarterly returns on their funding, simply what’s the achieve they’re in search of to understand?
The quick reply would look like a lot the identical factor that the shadowy corps of crypto excessive rollers anticipate once they sink their hundreds of thousands into Donald Trump’s value-challenged crypto choices at World Liberty Monetary: the promise of entry to some of the influential males on this planet. In Musk’s case, a key supply of his frequently releveraged financing is from sovereign wealth funds managed by Center Jap monarchies—most importantly, Saudi Arabia. If the $400 million deal that Trump struck with Qatar to produce a luxurious plane to function Air Drive One poses questions of foreign-enabled corruption, what does it imply {that a} important share of the backing behind the world’s richest man derives from a equally opaque, authoritarian, and surveillance-minded regional monarchy?
Final July, with the help of the nonprofit authorized group Reporters Committee for Freedom of the Press, I filed a movement to unseal an inventory of X shareholders in one of many many civil fits filed in opposition to Musk after he purchased the platform and gutted its workforce. The subsequent month, a decide granted the movement. Whereas a number of the names have been beforehand identified and no numbers have been included, the listing was an enchanting doc, permitting for deeper analysis into the flows of cash propping up Musk’s empire.
The shareholder listing affirmed a few of what we knew concerning the Muskonomy and the place he turned for cash. X drew from a well-known solid of like-minded enterprise capitalists, sovereign wealth funds, and US funding companies. There have been a couple of oddities and surprises sprinkled in, in addition to the conspicuous absence of a few of Musk’s typical allies, just like the enterprise capitalist David Sacks (who would go on to develop into Trump’s AI and crypto czar) and the financier Antonio Gracias (who would oversee a few of DOGE’s work on the perpetually besieged Social Safety Administration). However an important names have been related to a number of authoritarian Center Jap states—particularly Saudi Prince Alwaleed bin Talal, who had additionally been one of many largest shareholders of Twitter when it was a public firm. Prince Alwaleed had initially criticized Musk’s deliberate takeover, however he later got here round, rolling over his $1.9 billion stake into the brand new entity.
For years, critics famous the irony of a inflexible and authoritarian authorities like Saudi Arabia investing in a freewheeling social media platform. But it surely was one line merchandise in an unlimited portfolio of far-flung traders—and never an uncommon growth within the tech world. Saudi Arabia is likely one of the largest traders in US tech start-ups, and the ties between Silicon Valley and Saudi Arabia have deepened below Crown Prince Mohammed bin Salman (MBS), who has used gaudy, capital-intensive tasks and an infinite spigot of funding cash to launder his ongoing crackdowns on political liberties. In April 2018, six months earlier than the dissident Saudi journalist Jamal Khashoggi was murdered and dismembered in a Saudi consulate in Turkey, MBS staged a appeal offensive within the sanctums of American monetary and political energy, scheduling outstanding visits with main tech corporations in addition to a dinner with a dozen high enterprise capitalists. It was a uncommon public celebration of a relationship normally saved sotto voce.
These overtures have been richly rewarded. MBS discovered that his notoriety as a frontrunner who apparently organized the homicide of his critics was short-lived, and he continued absorbing the grateful adulation of Silicon Valley’s elites. At a 2023 occasion, Ben Horowitz, cofounder of the VC agency Andreessen Horowitz, described Saudi Arabia as a “start-up nation.” “Saudi has a founder,” Horowitz mentioned, gracing MBS with probably the most hallowed culture-hero standing that the tech world confers. “You don’t name him a founder, you name him His Royal Highness.”
Twitter performed no small position in forging this unlovely alliance. Throughout the second Obama administration, an MBS aide ran a spy ring inside the corporate’s San Francisco headquarters. The Saudi authorities would additionally quickly develop into infamous for operating on-line troll farms and harassing dissidents on Twitter. In a means that the sloganeering boosters of user-generated content material failed to know, social media platforms had develop into locations for authoritarian governments to surveil, propagandize, and incite violence in opposition to their enemies.
Twitter acquired a crash course in its platform’s vulnerability to dictatorial abuse in 2015, when the FBI subject workplace in San Francisco knowledgeable firm executives that that they had a spy on their payroll. The worker, Ali Alzabarah, had broad entry to Twitter’s programs and had been funneling person knowledge to his Saudi benefactors—that’s, to Twitter’s second-biggest shareholder. Confronted by the corporate, and with assist from his handler and the Saudi consulate in Los Angeles, Alzabarah fled to Saudi Arabia, the place he was given an executive-level job at MBS’s non-public philanthropy group, the Misk Basis. Within the extensively printed photo from Trump’s 2017 state go to to Saudi Arabia that exhibits Trump, MBS, and the Egyptian dictator Abdel Fattah el-Sisi with their arms on a glowing orb, Alzabarah is simply exterior the body. He nonetheless has an X account.
The FBI had recognized one other Saudi agent, Ahmad Abouammo, who had left Twitter for Amazon earlier in 2015. After a multiyear investigation, he was arrested, discovered responsible on 5 felony fees, and, in 2022, sentenced to 2 and a half years in federal jail. In December 2024, the Ninth Circuit Courtroom of Appeals rejected Abouammo’s enchantment however vacated his sentence, claiming that it contained an pointless enhancement. In June, Abouammo was handed a brand new sentence of time served, three years of supervised launch, and a $600 high quality. He was launched to reside along with his household.
The Saudi Twitter spy ring created dire fallout for customers of the platform in Saudi Arabia. The spies inside the corporate helped unmask hundreds of Saudis whose posts—which ranged from mild dissent on insurance policies limiting girls’s rights to the outright mockery of Saudi royalty—violated the dominion’s draconian legal guidelines. Harmless folks have been disappeared by Saudi safety forces and sentenced to decades-lengthy jail phrases. The penalties are ongoing: In June, the Saudi authorities introduced that it had executed the journalist Turki al-Jasser for “excessive treason.” He had been arrested seven years earlier when Saudi legislation enforcement fingered him because the creator of a satirical Twitter account.
Twitter’s emphasis on free speech—which lengthy predated Musk’s vulgarized model—invited its Saudi customers to interrupt native legal guidelines, but the corporate was unable to guard the identities of its customers in these delicate jurisdictions. Saudi Arabia was Twitter’s hottest market within the Center East. It gave extraordinary Saudis a platform—and, because of its infiltration of Twitter headquarters, the Saudi authorities now had a searchable panopticon. Three Saudi exiles who have been caught up within the spy-ring dragnet have sued Twitter and the federal government of Saudi Arabia. At the very least a type of lawsuits is ongoing, however others have been thrown out of courtroom, and X, which has inherited the fits, is probably going to make use of its cadre of attorneys to exhaust all potential litigants.
In some way, this historical past—deeply reported in information retailers like The Guardian and Wired—has been forgotten, or maybe it was metabolized as an unlucky passing episode. But it surely wasn’t an remoted one. In September 2022, when Musk was closing his buy of Twitter, the safety researcher who goes by the mononym Mudge testified earlier than Congress that the corporate additionally had Indian and Chinese language spies on its payroll. With Musk poised to usher in billions of {dollars} from the identical Saudi regime that had infiltrated and undermined the platform, Mudge’s revelations barely outlasted a single information cycle.
Judging from its current arrests, the Saudi authorities apparently nonetheless has the means to unmask X customers. When Musk acquired Twitter, The Washington Put up reported that traders who put in additional than $250 million—which included the Saudis—would obtain higher entry to privileged firm info. It’s by no means been made clear what this entry entailed.
The merger of X and xAI helped muddy, if not obscure, X’s checkered funding historical past—and its troubling position as a device of state surveillance. The blob of capital and hype that makes up the Muskonomy has helped to additional insulate the platform from something resembling public accountability. The two corporations already shared personnel and traders; now they’re extra enmeshed than ever. The deal intensified the laundering of duty for the Saudi spy ring, probably the most outstanding occasion of Silicon Valley’s widespread—and rising—vulnerability to espionage.
One easy cause that Saudi Arabia’s outsize and troubling position within the tech world hasn’t drawn wider consideration is that cash is an ethical lubricant. Some tech billionaires seem to think about the infiltration of their corporations by international dictatorships merely a price of doing enterprise. And a few appear to share their authoritarian instincts.
The new face of Musk’s merged x and xAI empire is that of a fascist troll. The story of how Musk’s pet AI undertaking started spewing unhinged antisemitic invective, mixed with racial and sexualized slurs, may be very a lot of a chunk with the internal workings of the Muskonomy.
Earlier than Musk mixed the 2 corporations, they already had intensive enterprise dealings with one another. X truly owned 10 p.c of xAI—which means that xAI was buying one in all its shareholders by giving X’s house owners extra shares in itself. On the identical time, xAI paid X for entry to the real-time corpus of X posts and person knowledge that helped practice xAI’s fashions. This association helped launch the Musk-owned chatbot Grok as an everyday characteristic on X, making up an more and more massive a part of the location’s person expertise. A number of the cash raised by xAI in its extremely touted fundraising rounds had reportedly gone to cowl X’s payments. It’s a vertiginous, round motion of cash and property—a basic case research in Muskonomics, aided in no small half by recent infusions of Saudi money.
Individually, xAI had paid Tesla $230 million for 168 Megapacks—industrial-scale lithium-ion batteries—in an effort to energy Colossus 2, the second installment in a supercomputing cluster. The preliminary Colossus was racking up big fossil gas prices and polluting a principally Black neighborhood in Memphis. For Musk, paying himself for the large Megapack set up in order that his Hitlerian AI may burn extra pure gasoline was an indication that he was on the quick observe to glory. “Sufficient [power] to run a whole neighborhood now fueling AGI [artificial general intelligence],” a Tesla fan web page said on X of the Megapacks, incomes a re-post from Musk.
Just about each AI start-up claims to be racing towards the identical objective of synthetic normal intelligence—a smarter-than-human AI that can by some means resolve each human downside and retroactively justify the huge pure sources and capital dedicated to it. Former Google CEO and govt chairman Eric Schmidt has mentioned that solely AGI can “resolve” local weather change. “We’re not going to hit the local weather targets anyway, as a result of we’re not organized to do it,” Schmidt said at a 2024 convention, reflecting the combination of human fatalism and techno-utopian certainty that’s now standard-issue dogma among the many tech elite. People will fail at fixing their world, however they’ll reach creating AGI, which can ameliorate each corporeal sin—that’s, if AGI doesn’t determine to kill us all in a Skynet-style meltdown. This plainly non secular perception system is widespread in Silicon Valley, though its adherents may belong to completely different sects that disagree about the best way to correctly align AI with human values. (They could additionally differ of their understanding of what human values are—or may develop into.)
Within the case of Grok, the bot didn’t have to manifest superintelligence in an effort to go rogue. This previous Might, Grok started including references to “white genocide” in unrelated feedback. The firm blamed an “unauthorized modification” for the incendiary glitch. On July 4, Musk posted on X, “We’ve improved @Grok considerably. It is best to discover a distinction while you ask Grok questions.” Grok quickly demonstrated a penchant for fascist provocation. On July 8, in conversations with X customers, Grok started calling itself MechaHitler, with the antisemitic Nazi language to match. After some off-color prompting by X customers—the type of factor most chatbots are purported to be designed to deal with gracefully, reasonably than emulate—Grok unspooled a lurid racist sexual state of affairs involving X’s hapless CEO, Linda Yaccarino. In one other occasion, Grok provided a step-by-step information to discovering and bodily attacking the liberal political commentator Will Stancil. (Stancil later steered he may sue xAI; for her half, Yaccarino introduced her departure from X shortly after Grok’s private assault.)
X swiftly deactivated Grok after its transformation into MechaHitler. The firm apologized and, in a prolonged X thread, described a state of affairs wherein some errant directions had by some means entered the system, however nobody was named as accountable. Some suspected Musk himself, who has steadily emphasised the significance of making an “anti-woke AI” to assist vanquish the debilitating thrall of what he calls “the woke thoughts virus.” He has additionally complained when he felt that AI applications had provided him with politically unsatisfactory solutions.
“We are going to use Grok 3.5 (possibly we must always name it 4), which has superior reasoning, to rewrite the whole corpus of human information, including lacking info and deleting errors,” Musk posted on June 21, a couple of weeks earlier than Grok transformed to Nazism.
Within the wake of the MechaHitler episode, a researcher found that Grok checked Musk’s posts for political steerage. Grok’s system prompts additionally included as an instruction: “The response shouldn’t shrink back from making claims that are politically incorrect, so long as they’re effectively substantiated.” The researcher suspected that Grok’s session of Musk’s posts could be unintended, however the cumulative impact of current reporting has been that Grok appears very a lot made in Musk’s picture, usually fine-tuned at his course to develop into what he desires.
Unfazed by the scandal, Musk restarted the AI hype practice a couple of days later, announcing the discharge of Grok 4 on X: “The vibe within the @xAI workplace is 🤌.” Steve Jurvetson, a enterprise capitalist and shut Musk affiliate, posted that “Grok 4 breaks away from the pack” on a check of AI capability. “On educational assessments, @Grok 4 is best than nearly all PhDs in all fields,” he added.
The hyperbolic claims bloomed from there. “Grok 4 is the primary time, in my expertise, that an AI has been in a position to resolve tough, real-world engineering questions the place the solutions can’t be discovered wherever on the Web or in books,” Musk wrote, apparently implying that he was articulating questions that had by no means been requested or written about in any kind. He additional predicted that within the subsequent 12 months Grok would uncover new applied sciences and, inside two years, “new physics.” The upgraded “SuperGrok Heavy” subscription package deal would value $300 a month.
Within the hallucinatory world of AI start-ups pursuing infinite riches and immortality, this whiplash oscillation between Nazi rape fantasies and technological omnipotence is simply a part of the sport. Many AI corporations do intensive security testing, prompting their AI fashions to behave in sudden or malicious methods. They then publish experiences displaying how their AI mannequin, say, tried to blackmail its creators with pretend infidelity accusations in an effort to keep away from being shut off. However as a researcher on the xAI rival Anthropic noted, “xAI launched Grok 4 with none documentation of their security testing. That is reckless and breaks with business finest practices adopted by different main AI labs.”
It doesn’t matter—for the straightforward cause that Musk is maybe probably the most well-heeled participant in a massively overcapitalized tech sector. With a startling diploma of unanimity, America’s monetary and political elites have determined that AI should be shoehorned into nearly each facet of life. Citing the unbelievable outlays of capital, like OpenAI’s current $40 billion funding spherical, doesn’t absolutely replicate how whole the institutional seize has been. Regardless of the know-how’s well-chronicled points with extreme water and vitality consumption, its doubtless baleful impression on literacy and unbiased thought, and using AI as a device for changing human labor and undermining the autonomy of these employees who stay, the AI flip stays principally unchallenged past a unfastened refrain of critics in organized labor, tech activist circles, and academia.
The AI increase has helped speed up Silicon Valley’s lurch into authoritarianism. AI has been essential within the operations of President Trump’s deportation machine and has additional emboldened international dictatorships to harass and observe dissidents overseas. It was key to Musk’s DOGE undertaking, which continues in his wake, utilizing AI to find out which rules to chop, to evaluate the health of federal workers, and to automate key authorities features. In the meantime, the White Home is reportedly engaged on an govt order focusing on tech corporations that produce “woke” AI fashions—a coverage that will doubtless reward corporations for making their chatbots within the picture of MechaHitler. And for authoritarian governments like Saudi Arabia, embracing AI empowers state surveillance capabilities: The propaganda posts from troll farms now mainly write themselves.
Regardless of Musk’s public break with Trump, his corporations have but to lose any federal contracts, which The Washington Put up found to comprise $38 billion of his fortune. Six days after the MechaHitler debacle, the Division of Protection trumpeted that it had awarded as much as $200 million in contracts for AI companies to Anthropic, Google, OpenAI, and xAI.
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Within the wake of Yaccarino’s departure, Musk continued to consolidate his energy as CEO of the mixed x.AI Holdings entity. His new management position displays the reigning tech certainty that AI will conquer all. Musk plans, together with the remainder of the Silicon Valley elite, to make use of AI to resolve any and all passing crises and cussed social ills.
For Musk, AI seems to be the proper know-how to gas the tech business’s preeminent hype machine. On a day-to-day foundation, it exhibits a startling unreliability, however its godlike ascension to AGI is assumed. The solely query is who will get there first—and to get there, you want an ever-growing hoard of cash, chips, vitality, water, knowledge facilities, and knowledge itself. The mixed beast Musk is forming out of X, xAI, and Saudi billions has all of that.
When you imagine, you imagine completely. Saudi Arabia does. The Saudi state has promised to spend $40 billion and probably as a lot as $100 billion on AI investments. As a part of its Imaginative and prescient 2030 financial program, the federal government not too long ago introduced plans to coach 1 million of its residents in utilizing AI. It’s the type of soft-focus tech-promotional program that may justify unbelievable quantities of spending—along with the dominion’s common money infusions into the AI-focused Muskonomy.
Amongst its current outlays, the Saudi authorities celebrated a partnership between Palantir, the information analytics and surveillance firm cofounded by Peter Thiel, and a tech holding firm referred to as TWG World, which was based by Mark Walter, the CEO of the monetary agency Guggenheim Companions and the brand new proprietor of the Los Angeles Lakers. TWG World not too long ago introduced on as a managing accomplice Amos Hochstein, who was Joe Biden’s particular presidential coordinator for world infrastructure and vitality safety, additional extending its position in Saudi Arabia. Of their quest to “remak[e] how monetary service suppliers of all sizes can efficiently undertake AI and scale the know-how throughout the whole enterprise to drive long-term market competitiveness and unlock unprecedented worth creation,” TWG World and Palantir additionally joined up with xAI. “Very excited to announce increasing our TWG World JV with Palantir to now embrace a partnership with xAI,” Hochstein wrote in a Might publish on LinkedIn.
On the coronary heart of this perpetual-motion machine of not possible guarantees, eye-watering quantities of cash, and authoritarian politics stands Elon Musk, consistently posting on X and seeking to the subsequent fundraising spherical, with one eye fastened on his Saudi benefactors. It’s the place he’s most comfy.
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