The issue with the internet is that it did take place in texas as well: The news article was available in texas, so the news corp can be sued there. Basically the argument is: “Media Matters harmed X’s brand in texas using misleading information” (you can read their arguments for filing in texas under the “Jurisdiction and Venue” section of their filing).

Also remember that this is currently X’s wish list: Media Matters can file for a change in venue.

Edit: Quick update.

Looking at their filing, the case will probably fail under a motion for summary judgment: They basically agree with Media Matters that they did show ads under extremist’s posts. They simply argue that you need to push the twitter algorithm to its limits by doomscrolling for a long time until the algorithm fails. However, this doesn’t make any of the facts provided by Media Matters (https://www.mediamatters.org/twitter/musk-endorses-antisemitic-conspiracy-theory-x-has-been-placing-ads-apple-bravo-ibm-oracle) wrong.