Elon Musk's self-deal for his AI company xAI to acquire X, formerly Twitter, is the strongest sign yet that the AI business is devouring the social media world.

Between the lines: Musk's move is a maneuver to spruce up his overall financial picture — leveraging the AI industry's fizzy valuation arithmetic to shore up X's stagnant revenue and debt-loaded capital structure.

• High expectations for xAI and every other AI darling are buoying the rest of the tech industry for now — but all that ends the moment the AI bubble bursts.

Why it matters: The entire social media world — including X, Meta-owned Facebook and Instagram, Google-owned YouTube, even the younger TikTok — has become a legacy platform.

• While this inherited business is still huge and in many cases profitable, it's not going to grow or innovate at the pace Silicon Valley and Wall Street demand.
• Right now, X may be the most financially challenged of the large social-media platforms. But Meta's and Google's properties are also benefiting from investors' bets on the parent companies' AI growth.

Catch up quick: 2 1/2 years after he bought Twitter, Musk has done little to grow its business or actually transform the company into the "everything app" he once planned.

• A month after he acquired the company, OpenAI released ChatGPT, and soon after it became clear that any new "everything app" was likely to be an AI tool, not a social media network.
• xAI gives Musk a convenient vehicle to scoot X out of the tarnished social media category and into the AI world.

Yes, but: X is a mature business with thousands of employees, hundreds of millions of customers and about $2 billion in estimated global ad revenue.

• Musk's drastic spending and staff cuts brought its overhead down, but it doesn't seem to have found a way to return to the revenue levels it last saw as the public company known as Twitter (a little over $5 billion) — let alone spark significant growth.

xAI, on the other hand, is a growing two-year-old startup that won headlines for getting a giant new data center in Memphis, Tennessee, built fast.

• The company's AI models have become contenders in the bigger AI race, earning comparisons with better-known rivals like OpenAI and Google.
• But for most of xAI's existence the bulk of its usage has come from the X network.

By the numbers: Musk says xAI's paper valuation based on its most recent private investment round is now $80 billion.

• Its exact revenue is a tiny fraction of that — maybe $100 million — meaning investors are paying 800 times revenue for their shares. (The equivalent figure for Tesla right now is about eight times revenue.)
• xAI's modest revenue stream in turn comes chiefly from X itself.
• For the moment, these dollars are all just circling the Musk-o-sphere in a slightly different configuration.

The big picture: Everyone in tech is benefiting from AI's magic multiplication powers right now.

• That definitely includes Meta and Google. Both giants have massive social media (and search) revenue streams, but both also rely on AI sparkle to tell a story about future growth — and mask stagnation in their core businesses.

The intrigue: Dollars aren't all that's flowing between X and xAI.

• xAI's models are already using the entire corpus of X user posts as training data.
• For users who object to that, the new ownership structure makes the arrangement that much more difficult to ignore.

Meta does exactly the same thing with its users' posts, of course.

• Google and YouTube appear to be somewhat less aggressive, but also apply user data to build a variety of AI-powered features.
• Then again, all of Google's services, starting with search, are essentially one giant algorithmic supercomputer powered by user data. Generative AI is just the newest and outermost layer.

The bottom line: As AI's conquest of tech-industry mindshare advances, social media is decreasingly important as a business — and increasingly treated as an exploitable data resource to build AI.

AI use among school-aged children has increased dramatically as the bots appear in everything from Google searches to Spotify playlists.

Why it matters: Teachers warn that AI could be hurting students' critical thinking skills.

State of play: In fall 2023, a survey from Common Sense Media found that nearly half of young people had never used AI tools or didn't know what they were, but by September 2024, 70% of U.S. teens had used at least one type of generative AI tool.

• More than half of respondents to the 2024 survey said they had used AI for homework help.

The big picture: Gina Parnaby, a 12th grade English teacher at Atlanta's Marist School, told Axios that she has seen students using AI "as a way to outsource their thinking" and "flat-out cheat."

• Parnaby noted the AP test her students take emphasizes the "concept of a line of reasoning."
• Those who rely on AI chatbots risk losing those critical-thinking muscles. "It's like expecting to run a mile when you've only ever run a 40-yard dash," Parnaby said.

Case in point: A study released last month from researchers at Carnegie Mellon University and Microsoft found that generative AI tools, when "used improperly ... can and do result in the deterioration of cognitive faculties that ought to be preserved."

• "AI can improve efficiency, it may also reduce critical engagement ... raising concerns about long-term reliance and diminished independent problem-solving," the study noted.

Zoom in: Alexa Borota, an 11th grade teacher at New Jersey's Trenton Central High School, agrees AI can hurt students' critical thinking skills and worsen attention spans already shortened by smartphones.

• Both teachers said the effects of AI are more corrosive on younger students who don't have the foundations of knowledge that college and graduate students do.
• Parnaby and Borota both emphasized that constant reliance on AI would also leave students without the stamina to complete standardized tests — including SATs and ACTs, which are crucial for college admission.

Between the lines: That doesn't mean AI has no place in schools. If used correctly, AI systems have the potential to act as tutors for kids who need extra help with schoolwork, Denise Pope, a senior lecturer at Stanford's School of Education, told Axios.

• "For some kids ... they don't have a parent at home who might be able to help them, or ... English isn't their first language," Pope said. "This is a way to level the playing field."
• Pope also argued that students need to learn to use AI because the technology is only going to become more prevalent in the working world.

• Apple is planning an AI doctor service that will use data collected from your devices to give tailored health advice using AI. (Bloomberg)
• Justine Bateman is launching a "no-AI" film festival. (Hollywood Reporter)
• CoreWeave CEO Mike Intrator told Axios that the company's IPO was still a win, even if the company raised less money than it had hoped for.

Here's a fun one I saw online if you have an iPhone handy. Activate Siri and say "I see a little silhouette of a man."