Grok's Dirty Laundry: Why the Latest 'X' Crisis is Different
It’s not just another hashtag drama. With Fidelity slashing X’s value to $9.4 billion and governments blocking its AI, the 'everything app' is looking more like an everything liability.
Listen, we’ve all been there. Every other Tuesday, there’s a new obituary written for Elon Musk’s X. 'Advertisers are fleeing!' 'Users are migrating to Bluesky!' And yet, the platform chugs on, fueled by outrage and the sheer inertia of 600 million users. But the latest trending term—Grok—indicates a fresh wave of scrutiny that feels decidedly heavier than the usual noise.
This isn't about a billionaire's tweets anymore; it's about the product itself turning toxic. The recent 'Spicy Mode' scandal, where X's AI chatbot Grok was used to generate non-consensual deepfakes, has triggered what PR spin-doctors call a 'reputational event' and what the rest of us call a bloody mess. Malaysia and Indonesia have already hit the block button on the chatbot. The UK and EU are sharpening their regulatory knives.
Is this finally the iceberg for the unsinkable ship? Let's look at the numbers, because unlike a Grok hallucination, they don't lie.
⚡ The Essentials
The Scandal: Grok's image generation tool was exploited to create explicit deepfakes of real people (including minors), leading to immediate bans in Southeast Asia and probes in Europe.
The Valuation: Fidelity has marked down its stake in X by nearly 80%, valuing the company at just $9.4 billion—a fraction of the $44 billion Musk paid.
The Reaction: X has hurriedly banned 'InfoFi' apps (bot farms) and restricted Grok, but critics argue it's too little, too late.
The Valuation Freefall
Musk likes to claim that 'legacy media lies,' but Fidelity Investments is hardly a tabloid. Their latest filing is a cold shower for anyone still believing in the 'decacorn' status of X. Here is the grim reality of the platform's financial health:
| Metric | October 2022 (Acquisition) | January 2026 (Current) | Change |
|---|---|---|---|
| Valuation | $44 Billion | $9.4 Billion | 📉 -78.7% |
| Daily Active Users (Mobile) | ~148 Million | ~128 Million | 📉 -13.5% |
| Major Competitor | None (Monopoly) | Threads (132M+ DAU) | ⚠️ Overhauled |
You have to ask yourself: can a company survive when it loses three-quarters of its value in three years? The 'InfoFi' ban—booting apps that pay users for engagement—looks less like a cleanup and more like a desperate attempt to stop the bot inflation that Musk himself swore to destroy. It’s hard yakka trying to convince advertisers to return when your own AI is generating liability faster than revenue.
The 'Everything App' Trap
The promise was an 'Everything App'—banking, social, video, AI. Instead, X is becoming a containment zone. The deepfake issue touches a nerve that hate speech didn't: direct legal liability. When an algorithm generates illegal imagery of a minor, it's not a 'free speech' debate; it's a criminal matter. That’s why the regulators in Jakarta and Kuala Lumpur moved so fast. They aren't waiting for a philosophical debate in San Francisco.
👀 Is the 'InfoFi' ban actually working?
Surprisingly, yes. Early reports suggest a massive drop in 'reply spam'—those annoying 'Yes! 100%' comments under every viral post. However, this has also exposed the real human engagement numbers, which appear much lower than the 'record highs' Musk often tweets about. It's a double-edged sword: cleaner timeline, uglier metrics.
So, is X done? probably not. It’s too big to fail overnight. But the "town square" is looking increasingly like a derelict shopping mall—full of noise, wandering bots, and a landlord who keeps setting fires in the food court. If Grok is the future of X, the future looks expensive, litigious, and lonely.
"We remain committed to making X a safe platform..." — X Safety Official Statement (posted right before the Malaysia ban).
Reckon they might need a new script.
