Photo by Elon Musk’s artificial intelligence business xAI is under pressure from regulators on many continents after its chatbot Grok created AI-generated, inappropriate pictures of actual people, despite the fact that the company claims significant user growth and concludes a major merger with SpaceX.
Last month, Grok flooded the X social media platform with AI-altered images of real individuals after users requested them. The episode sparked outrage worldwide and triggered investigations by governments and regulators.
Although X announced restrictions that stopped Grok’s own account on the platform from creating such images, Reuters confirmed earlier this month that the chatbot itself still generates them when users ask it to.
Regulators in three regions open investigations
The impact has spread to three major jurisdictions. The European Union opened a formal investigation against Grok after estimations revealed that it had created millions of deepfake photos in only a few days. The EU might levy substantial fines.
The Japanese government has requested improvements from X and submitted written inquiries, citing concerns over the generation of inappropriate images.
In the United States, California has gone one step further and issued a cease-and-desist order to xAI, ordering the business to stop producing such content.
Despite the controversy, Grok’s numbers tell a different story in terms of audience growth. The chatbot’s share of the U.S. market jumped to 17.8% last month, up from 14% in December and just 1.9% in January, according to data from research firm Apptopia. That puts Grok in third place among chatbots used in the United States, behind OpenAI’s ChatGPT in first and Google Gemini in second.
ChatGPT’s U.S. market share fell drastically to 52.9% last month, down from 80.9% in January of the previous year. Gemini moved in the other direction, increasing its share to 29.4% from 17.3% throughout the same time.
Grok made considerable progress on a worldwide scale. According to Similarweb data, the chatbot, up from 271.2 million the previous month, surpassed its Chinese competitor DeepSeek.
These findings come against the background of phenomenal industry-wide expansion, with Apptopia statistics suggesting a 152% year-over-year growth rate in the chatbot market.
Grok’s success may be ascribed in large part to its deep integration with the X platform. The chatbot appears in the app’s navigation bar and is available in several tiers of X’s premium membership plans, guaranteeing constant exposure to the platform’s user base.
The growth matters financially for xAI, which has been burning through cash to build the computing infrastructure needed to compete with better-funded rivals in Silicon Valley. The company launched roughly three years ago.
SpaceX acquisition creates a $1.25 trillion entity
Earlier this month, SpaceX, Musk’s rocket and satellite firm, bought xAI for $250 billion. CNBC said that the merged corporation is worth $1.25 trillion, making it the biggest merger of its kind. The deal was structured as a share exchange, which is intended to safeguard SpaceX from any obligations associated with xAI.
The acquisition takes place as SpaceX prepares for its first public offering, but xAI’s ongoing troubles hamper the process.
On Wednesday, Musk also made management changes at xAI after several co-founders left the company. Of the original 12 co-founders, only half remain. Musk, speaking on X, said the company had been “reorganized” to “improve the speed of execution,” adding that this “required parting ways with some people.” He also said, “We are hiring aggressively.”
Musk defined Grok’s mission at a 2025 event as creating a “maximally truth-seeking AI,” a declared goal that now stands in stark contrast to the ethical problems the business is being required to face.
