Elon Musk’s AI startup xAI has successfully raised a total of $10 billion through a combination of debt and equity financing. This fresh capital infusion, confirmed by Morgan Stanley, positions xAI to ramp up its competition within the rapidly evolving global AI landscape, particularly against rivals such as OpenAI and Amazon-backed Anthropic. The funding includes both debt and equity components – $5 billion was secured via secured notes and term loans, while the remaining $5 billion through an equity investment. Morgan Stanley indicated that the debt offering was oversubscribed as well.
The newly acquired funds will primarily bolster xAI’s infrastructure development, with its Colossus supercomputer in Memphis, Tennessee, being central to this effort. Elon Musk previously disclosed in May that Colossus already houses 200,000 graphics processing units (GPUs). According to Morgan Stanley, the proceeds will facilitate “xAI’s continued development of cutting-edge AI solutions, including one of the world’s largest data centers and its flagship Grok platform.”
“The proceeds will support xAI’s continued development of cutting-edge AI solutions, including one of the world’s largest data center and its flagship Grok platform. Morgan Stanley is proud to partner with xAI in this milestone transaction, which underscores our commitment to support pioneering companies shaping the future of technology,” read Morgan Stanley’s post on X.
Speaking of Grok, it is xAI’s flagship AI chatbot, with the latest iteration, Grok 3, unveiled in February. It was also deeply integrated with the social media platform X, formerly Twitter. This integration occurred earlier this year, back in March when xAI acquired X. At that time, the micro-blogging site was valued at $33 billion, and xAI itself at $80 billion.
Musk has publicly positioned Grok as a “maximally truth-seeking” AI, distinguishing it from competitors with a stated “anti-woke” stance. This differentiation has, however, generated controversy, with instances earlier this year where Grok’s responses to user queries included comments on sensitive topics such as “white genocide” and South Africa.
The latest capital injection into xAI occurs amid an intensifying funding race among American AI startups. Recent years have seen companies secure multiple investments to procure essential hardware, particularly GPUs, and to build the immense data center infrastructure required for advanced AI training. The competition for AI dominance also encompasses attracting top talent, securing exclusive data access, and developing specialized AI models for various industry applications. Companies are investing heavily in fundamental AI research, pushing the boundaries of what AI can achieve in areas like reasoning, multimodal understanding, and autonomous agents as well.
OpenAI, a key rival and a company co-founded by Elon Musk, had closed a $40 billion financing round earlier this year, which propelled its valuation to $300 billion. Its prominent investors include Microsoft and Japan’s SoftBank. Similarly, Anthropic, the developer of the Claude chatbot and backed by Amazon, concluded a funding round in March that valued the firm at $61.5 billion. Anthropic subsequently secured a five-year $2.5 billion revolving credit line in May. Still, Musk has had public disagreements with other AI leaders, notably OpenAI’s Sam Altman. He has asserted that OpenAI has deviated from its original mission as a non-profit entity focused on beneficial AI for humanity, contending it is now primarily driven by commercial success. In February, Musk, alongside a group of investors, reportedly made a $97.4 billion bid to acquire control of OpenAI, an offer that Altman promptly rejected.
