"xAI," Musk’s AI Startup, Nears Massive $9.3 Billion Funding Round

The logo of xAI and the face of Elon Musk

 "xAI," Musk’s AI Startup, Nears Massive $9.3 Billion Funding Round

Elon Musk’s AI venture, [xAI], is closing in on a massive $9.3 billion funding round, combining debt and equity offerings, according to Bloomberg and Al Arabiya Business. The move comes as investors appear willing to overlook Musk’s recent clash with former U.S. President Donald Trump, which initially complicated fundraising efforts.

Investors have already submitted orders exceeding $5 billion for bonds and loans, giving Morgan Stanley bankers confidence in finalizing the deal. In addition, xAI told investors it plans to raise $4.3 billion through equity, providing the company with capital to build data centers as it challenges Open AI, Anthropic, Google, and others in the rapidly evolving AI space.

Founded in 2023, xAI aims to create advanced AI tools. Musk’s chatbot “Grok” is marketed as a bold alternative to Chat GPT and Google’s Gemini, promising a pursuit of truth over political correctness.

In March, Musk merged xAI with his social platform X, valuing the combined entity at $113 billion. A recent secondary offering has allowed employees to sell shares, potentially confirming that valuation.

However, the fundraising campaign was recently shaken by a public fallout between Musk and Trump on social media. Though Musk later expressed regret for some of his comments, the split raised investor concerns, especially since Musk had previously touted his White House ties as a competitive advantage.

Despite skepticism from some investors—several of whom told the Financial Times they chose not to participate—many institutional funds found value in the $5 billion debt package, expected to yield around 12%. The financing includes both fixed and floating-rate loans, alongside bonds, with pricing expected later this week.

xAI reported $341 million in Q1 losses before interest, taxes, depreciation, and amortization (EBITDA). Still, it projects a significant turnaround, forecasting over $13 billion in EBITDA by 2029. For comparison, Open AI projects $125 billion in revenue that year, despite expecting continued losses in the near term.

If completed, this funding round would significantly bolster xAI’s ambitions to compete at the top tier of the AI industry.