Two years after Elon Musk’s controversial $44 billion acquisition of Twitter, now rebranded as X, the social media platform is seeing a glimmer of resurgence. Fidelity, a major investor in X, recently increased the valuation of its stake in the platform by 32.37% in October 2024, marking the largest monthly hike since Musk’s purchase. Despite this uptick, X is still valued at just $12.5 billion — far below the price Musk originally paid.

While skeptics have long criticized the deal as a financial misstep, recent developments suggest that Musk’s strategic moves may be positioning X for a new chapter of growth.

Fidelity’s Valuation Boost and the Role of xAI

Fidelity’s decision to raise its valuation of X is largely tied to the performance of Musk’s other ventures, particularly xAI, his artificial intelligence startup and competitor to OpenAI. Founded in March 2023, xAI has quickly become a major player in the AI landscape, with a reported valuation of $50 billion. The company has established a symbiotic relationship with X, using posts from the platform to train its generative AI chatbot, Grok.

Unlike competitors such as OpenAI, Google, and Microsoft, which rely on costly deals with external content creators to train their AI tools, xAI leverages X’s vast user-generated content for free. This integration has not only added value to Musk’s AI venture but has also helped boost the perceived worth of X, despite its struggles with user growth and advertising revenue.

Fidelity’s investment in xAI’s $6 billion funding round earlier this year, which has since been marked up by 70%, further highlights the interconnected fortunes of Musk’s companies.

The Political Dimension: Musk’s Alliance with Trump

Musk’s growing political clout has also played a role in X’s perceived resurgence. As a prominent ally of President-elect Donald Trump, Musk has used X to amplify his political influence. Since endorsing Trump in June 2024, Musk has frequently posted political content supporting Trump and criticizing the Democratic Party, engaging his 206 million followers in the process.

Musk’s involvement in Trump’s campaign extended beyond social media. His newly formed America PAC contributed an estimated $200 million to Trump’s election efforts, with the Associated Press reporting that most of the PAC’s $130 million raised between April and October came directly from Musk. Steve Bannon, a former Trump strategist, credited Musk’s financial backing as a key factor in Trump’s victory.

Musk’s Expanding Role in Government

Musk’s influence hasn’t waned post-election. He has been a fixture in Trump’s transition team, attending meetings with foreign ambassadors and potential administration appointees. His presence has even shaped some of Trump’s cabinet picks, including the new head of the Federal Communications Commission, a figure reportedly favored by Musk.

Additionally, Musk is set to co-lead the Department of Government Efficiency, a new initiative designed to reduce government spending and bureaucracy. Working alongside entrepreneur Vivek Ramaswamy and several Republican lawmakers, Musk has proposed eliminating federal agencies such as the Consumer Financial Protection Bureau and restructuring others, including the IRS and FBI. This initiative underscores Musk’s ambitions to reshape not just the tech world but also the government.

Challenges and Controversies

Despite these developments, X faces significant hurdles. The platform has struggled to retain advertisers, with major brands like Walmart, IBM, and NBCUniversal pulling out due to concerns about hate speech and Musk’s controversial posts. The 2024 presidential election exacerbated these challenges, as many users migrated to left-leaning competitors like Bluesky.

X’s lagging user growth and diminished valuation remain sticking points. However, Fidelity’s renewed confidence, bolstered by the success of xAI and Musk’s political prominence, signals that the platform’s fortunes could improve in the coming years.

The Road Ahead for X and Musk

Musk’s acquisition of Twitter was widely seen as a risky move, and the financial metrics still suggest a steep climb ahead. Yet, his ability to integrate X with his other ventures, particularly in AI, and his strategic alignment with political powerhouses like Trump have positioned the platform for a potential comeback.

While it’s too early to declare Musk’s X acquisition a success, the recent valuation hike and growing influence of xAI provide a more optimistic outlook. As Musk continues to leverage his cross-industry ventures and political connections, the world will watch closely to see if X can truly rise from the ashes of its initial struggles.

For now, the message is clear: Musk’s gamble on X might not have been such a bad move after all.