Elon Musk's xAI acquisition of X triggers new EU regulatory scrutiny

Elon Musk's artificial intelligence venture, xAI, and its acquisition of the social media platform X, formerly known as Twitter, valued at $33 billion, have drawn heightened scrutiny from European Union regulators, reported Bloomberg.

This new focus comes as the European Commission prepares to assess potential penalties against X under the Digital Services Act (DSA), a comprehensive rulebook for online content.

The xAI-X acquisition

The acquisition, announced by Musk in March 2025, involved an all-stock transaction where xAI purchased X, effectively bringing the social network under its control.

According to Musk, the combination valued xAI at $80 billion and X at $33 billion (or $45 billion including $12 billion of debt).

The billionaire stated at the time that this deal streamlines his various businesses and "solidifies the relationship" between the former Twitter and xAI, which utilizes information from the social network to refine its chatbot, Grok.

Musk further emphasized that "xAI and X’s futures are intertwined," with the aim to "unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach."

The newly combined entity, XAI Holdings, was valued at over $100 billion, excluding debt, the Bloomberg report said, citing a source.

xAI reportedly spends $1 billion per month to finance the cash heavy AI investments.

EU regulatory framework and potential penalties

Following the acquisition, the European Commission has intensified its examination of X's corporate structure.

Sources in the report indicated that the Commission recently issued new inquiries to X.

This reflects a concern among regulators that the structure of the combined companies could influence the scale of any potential fine.

Under the Digital Services Act, penalties are directly linked to a company's global revenue, implying that the financial size and organizational setup of the integrated entities may impact the eventual monetary sanction.

The Brussels-based regulator could impose the first fine under the DSA for X's alleged infractions before its summer recess in August, according to the sources.

While the exact size of the potential levy remains undisclosed and subject to change, X retains the option to address the EU's grievances to potentially avoid a penalty.

Thomas Regnier, a Commission spokesperson, affirmed on Thursday that the body is "following closely changes in the corporate structure of X, as we would changes in any other designated platform".

He confirmed that a request for information had been sent to X.

The DSA grants the European Commission the authority to impose penalties of up to 6% of a company's annual global revenue for failures related to tackling illegal content, combating disinformation, or adhering to transparency regulations.

X's compliance efforts and ongoing investigation

In an apparent effort to allay EU concerns, X recently attempted to clarify the functionality of its blue checkmark program with a public disclaimer.

This program, whose changes under Musk's ownership had previously drawn criticism from regulators for allegedly misleading users by no longer indicating "verified profiles of public individuals" and not aligning with "industry practice," was a core concern for the Commission.

X's notice aimed to demonstrate that the contentious behavior has ceased.

The ongoing scrutiny of X's new corporate structure underscores the European Union's commitment to enforcing its digital regulations on major online platforms, especially as they undergo significant changes in ownership and business integration.

X is also preparing to allow users to conduct investment and trading activities directly on its app.