Musk's xAI in talks to raise $4. 3 billion in equity funding
The xAI logo on a smartphone arranged in New York.
Image: Gabby Jones/Bloomberg
Elon Musk's artificial intelligence startup xAI is in talks to raise $4.3 billion (R77bn) through an equity investment on top of the $5bn it has recently been trying to borrow from debt investors, according to information the company shared with investors who asked not to be identified because it is private.
Musk's company, which is responsible for the AI chatbot Grok, needs the new money, in part, because it has already spent most of what it previously raised, the materials shared with investors indicate.
Between its founding in 2023 and when the debt sale was launched this year, xAI raised $14bn via equity fundraising, according to the materials. But as of March 31, only $4bn of that was left on the company's balance sheet, the information showed.
The new equity infusion is luring investors back into xAI's debt offering, which was being circulated just as Musk's public spat with President Donald Trump was playing out. The company has also offered changes to the debt documents to assuage investors' concerns, people familiar with the matter said. The changes make it more difficult for xAI to shift assets, which protects lenders' collateral, and also set a ceiling on the amount of secured debt it can raise, the people added.
Commitments on the $5bn debt sale are due Tuesday, according to a different person with knowledge of the matter. In addition to the fresh funding, xAI may also get a $650 million rebate from one of its manufacturers that will help the firm cut costs, people familiar with the matter said.
A spokesperson for the company declined to comment, as did a spokesperson for Morgan Stanley, the bank in charge of xAI's debt sale.
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Huge fundraising rounds have become a standard feature of the fiercely competitive artificial intelligence industry, in which the top players are jockeying to secure the expensive computer chips and infrastructure needed to train advanced AI models like Grok and ChatGPT.
Despite the big spending, potential xAI investors have been told that the company's valuation grew to $80bn at the end of the first quarter, up from $51bn at the end of 2024. Investors in previous rounds have included Andreessen Horowitz, Sequoia and VY Capital.
Musk recently decided to merge xAI with his social media company X but the new funds will go toward the AI operations.
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The xAI logo on a smartphone arranged in New York. Image: Gabby Jones/Bloomberg Elon Musk's artificial intelligence startup xAI is in talks to raise $4.3 billion (R77bn) through an equity investment on top of the $5bn it has recently been trying to borrow from debt investors, according to information the company shared with investors who asked not to be identified because it is private. Musk's company, which is responsible for the AI chatbot Grok, needs the new money, in part, because it has already spent most of what it previously raised, the materials shared with investors indicate. Between its founding in 2023 and when the debt sale was launched this year, xAI raised $14bn via equity fundraising, according to the materials. But as of March 31, only $4bn of that was left on the company's balance sheet, the information showed. The new equity infusion is luring investors back into xAI's debt offering, which was being circulated just as Musk's public spat with President Donald Trump was playing out. The company has also offered changes to the debt documents to assuage investors' concerns, people familiar with the matter said. The changes make it more difficult for xAI to shift assets, which protects lenders' collateral, and also set a ceiling on the amount of secured debt it can raise, the people added. Commitments on the $5bn debt sale are due Tuesday, according to a different person with knowledge of the matter. In addition to the fresh funding, xAI may also get a $650 million rebate from one of its manufacturers that will help the firm cut costs, people familiar with the matter said. A spokesperson for the company declined to comment, as did a spokesperson for Morgan Stanley, the bank in charge of xAI's debt sale. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Huge fundraising rounds have become a standard feature of the fiercely competitive artificial intelligence industry, in which the top players are jockeying to secure the expensive computer chips and infrastructure needed to train advanced AI models like Grok and ChatGPT. Despite the big spending, potential xAI investors have been told that the company's valuation grew to $80bn at the end of the first quarter, up from $51bn at the end of 2024. Investors in previous rounds have included Andreessen Horowitz, Sequoia and VY Capital. Musk recently decided to merge xAI with his social media company X but the new funds will go toward the AI operations. BLOOMBERG
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Picking up on the trust, or mistrust, of the machine, Biyela said 'there's a lot of antagonism around AI, especially with articles not disclosing if they're AI-assisted. When audiences hear something was generated by AI, they often turn away. It becomes less of an achievement if it wasn't really done by a human.' But, he said, 'audiences (and ourselves) need to understand AI's limitations and how it actually works. We call it artificial intelligence, but it's in no way intelligent. It's an automaton that looks like it's thinking, but it's not. It's a clever prediction model using computing power to make it seem like it's thinking for us. But it's not. The thinking is always being done by people. AI never does anything; it's always us. What it produces has been trained to give us what we want.' Biyela emphasises that 'You're the human in the loop' and have to account for every line an LLM is asked to produce. 'If it summarises something you haven't seen, you have to check it. It makes the job easier, but it doesn't perform it.' Caveats aside, Biyela says 'generative AI also offers potential in communicating science in underserved languages, like African languages. Driving AI In his conclusion, Inglis, too, reached for a metaphor to guide how science communicators and other professionals and students should engage with AI: 'We would never jump into a car without having learnt to drive the thing. Now you've got these tools at our disposal and we'll use them, but we've got to be aware of the dangers that using them for the wrong things can bring about in the world.' 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