Elon Musk's xAI Seeks $4.3 Billion in Equity Funding Amid Soaring Expenses

Elon Musk's xAI is reportedly seeking a $4.3B equity raise | TechCrunch

Elon Musk's startup xAI is trying to raise a $4.3 billion equity investment, according to a report from Bloomberg. This equity funding would be in addition to the $5 billion that Musk is allegedly trying to raise in debt funding for the combined entity of X and xAI. The company appears to be raising money again after landing a $6 billion cash infusion in December, because it has already spent much of its money. xAI makes Grok, the AI chatbot that's embedded inside the social network X, as well as the image generator Aurora. The technology that powers these products is notoriously resource-intensive, which could be contributing to the rate at which the company is spending money.

Elon Musk's xAI is projected to lose $13 billion in 2025 -- AI project burns $1 billion a month in expenditures

As Elon Musk's xAI startup is trying hard to catch up with Anthropic, Google, and OpenAI, it is burning through cash, currently costing around $1 billion each month, according to a Bloomberg report that cites investors who saw the company's books. This year alone, the company reportedly plans to spend around $13 billion, but earn only around $500 million, which is going to leave it deep in the red. xAI was established in mid-2023 with the aim of becoming the world's leading AI company with the most advanced AI models. To achieve its goal, xAI has spent billions on data centers (one of them now houses a cluster with 200,000 Nvidia Hopper GPUs) and shows no sign of stopping its hardware procurements as it strives to train models that are more advanced than those offered by Anthropic, Google, or OpenAI. Unlike other AI companies that rent GPUs and compute power, xAI is investing in its own systems. Elon Musk announced plans to build a supercomputer with one million Blackwell GPUs for xAI, although it is unclear where the company intends to obtain the funding to support such a project, which is estimated to cost between $50 billion and $62.5 billion. Despite raising $14 billion in equity since its founding in 2023, xAI had only $4 billion remaining at the end of March 2025. According to investor communications, most of that was expected to be spent by the end of the second quarter. The company also informed investors that it expects to receive a $650 million rebate from a hardware manufacturer, which could slightly reduce pressure on its cash reserves. As a result, the company is urgently trying to secure $9.3 billion in new funding to cover its costs. Of this amount, $4.3 billion is expected to come from an equity round that is nearing completion, while $5 billion will be raised through debt. For 2026, xAI plans an additional $6.4 billion in equity funding, since with sales projections of $2 billion, it will still be in the red next year. By contrast, OpenAI is expected to generate $12.7 billion this year (according to Bloomberg), though it will not be profitable. However, while executives at xAI project that profitability could be reached by 2027, OpenAI's internal timeline anticipates positive cash flow by 2029, according to Bloomberg. However, to become profitable, xAI will need to either increase its earnings to over a billion per month or cut its costs well below $1 billion a month. As of the first quarter of 2025, xAI's valuation climbed to $80 billion, up from $51 billion at the end of 2024. The increase in value, coupled with Musk's track record and influence, has attracted major investors including Andreessen Horowitz, Sequoia Capital, and VY Capital.

Musk's xAI in Talks to Raise $4.3 Billion in Equity Funding

Elon Musk's artificial intelligence startup xAI is in talks to raise $4.3 billion through an equity investment on top of the $5 billion 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.

Musk's xAI Burning Through $1 Billion a Month as Costs Pile Up

Elon Musk's artificial intelligence startup xAI is trying to raise $9.3 billion in debt and equity, but even before the money is in the bank the company has plans to spend more than half of it in just the next three months, according to deal terms shared with investors. The rate at which the company is raising funds and tearing through cash offers a stark illustration of the unprecedented financial demands of the artificial intelligence industry, and the relatively meager revenues it is bringing in so far, at least when it comes to xAI.

Musk's xAI in talks for $4.3 billion equity funding, Bloomberg News reports

June 17 (Reuters) - Elon Musk's AI startup xAI is in talks to raise $4.3 billion through an equity investment on top of its $5 billion debt funding plans, Bloomberg News reported on Tuesday, citing information shared with investors. Between its founding in 2023 and when the debt sale was launched this year, xAI raised $14 billion through equity fundraising, the report said. The Grok chatbot maker needs new funding, partly because it has already spent most of what it previously raised, according to the report. XAI did not immediately respond to Reuters' request for comment. Reporting by Jaspreet Singh in Bengaluru; Editing by Leroy Leo Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

Elon Musk's xAI nears $9.3bn equity and debt deal

Elon Musk's artificial intelligence company xAI is nearing a $9.3bn debt and equity deal, as investors looked past the billionaire's spat with President Donald Trump that had complicated the capital raising efforts. Investors have placed orders of more than $5bn in a bond and loan offering, giving the company's bankers at Morgan Stanley confidence that they can finalise the financing round, according to people briefed on the matter. xAI has told investors it also expects to complete a $4.3bn equity raise alongside the new debt package, giving it added firepower to build data centres as it looks to compete with rivals including OpenAI. The company, founded in 2023, is competing with OpenAI, Anthropic, Google and others to develop and commercialise increasingly sophisticated AI tools. Musk's company launched its own chatbot, Grok, as an irreverent alternative to ChatGPT and Google's Gemini, claiming it would seek the truth rather than a politically correct narrative. Musk combined xAI with his social media company X in March, in a deal that valued the combined entity at $113bn. The group recently launched a secondary offering, in which staff can sell their shares to investors, which would serve to validate the pricetag set by Musk in March. The new fundraising was caught in the crossfire between Musk and Trump earlier this month when the two men lashed out at each other on social media. Musk has since said he regrets some of his posts about Trump. The close ties between the two men, with Musk referring to himself as the president's "first buddy", had been seen as a boon to investors who were doing due diligence on xAI. Musk had touted his close relationship with the White House in his pitch to investors, claiming the links could help him edge out rivals including OpenAI and Anthropic, according to two people familiar with the matter. The unravelling of Musk's relationship with Trump, in turn, raised new questions for investors and damped the enthusiasm of some, with several telling the Financial Times they decided against participating in the deal. Nonetheless, several big money managers saw value in the $5bn debt package, with the bonds expected to be priced with a yield of about 12 per cent. The financing is expected to be split between fixed- and floating-rate loans and a bond. Investment group TPG Angelo Gordon agreed to anchor the deal, committing to invest $1bn in the debt, one person noted. Commitments are due on Tuesday and it is expected to price later this week. xAI did not respond to a request for comment. Morgan Stanley and TPG declined to comment. The borrowing package and equity raise will give the firm the capital it needs to construct new data centres as it looks to compete with rivals. xAI and its competitors are burning through money as they look to equip data centres with chips that power their large language models. xAI told investors that it lost $341mn before interest, taxes, depreciation and amortisation in the first quarter, according to a person familiar with the matter. But the company set lofty projections for its future, forecasting ebitda of more than $13bn in 2029. OpenAI, by comparison, has forecast revenues of $125bn in 2029, though the company still expects to be lossmaking until then.

Musk's xAI on track to raise $5 billion in fresh debt, following modest demand

Elon Musk announced his new company xAI which he says has the goal to understand the true nature of the universe. Elon Musk's xAI is on track to close on a $5 billion debt raise led by Morgan Stanley, despite tepid investor demand, according to two people familiar with the matter. The $5 billion debt sale, which includes a floating-rate term loan, a fixed-rate loan and secured bonds, will be allocated to investors on Wednesday, the two people said, asking not to be identified because the deal is private. xAI did not immediately respond to a request for comment while Morgan Stanley declined. The xAI offering, which was reported on June 2 as Musk and U.S. President Donald Trump traded barbs over social media, did not receive overwhelming interest from high-yield and leveraged loan investors, said five people briefed on the deal. The floating-rate loan will be offered with an interest rate of 700 basis points over the Secured Overnight Financing Rate, a benchmark rate used to price bond deals, while the fixed-rate loan and secured notes will pay a yield of roughly 12%, the two people said. The average yield-to-maturity on high-yield bonds closed Monday at 7.6%, according to the ICE BofA High Yield Index .MERH0A0. Musk's AI company has to pay significantly more since xAI and its debt are not yet rated, giving investors little visibility into the company's finances and higher risk. Three bond investors who were offered the debt told Reuters they declined to invest. One of these investors noted that xAI has not yet turned a profit and the debt is not rated. They were especially reticent given Musk's track record when he financed his $44 billion acquisition of social media giant X, known at the time as Twitter, in 2022. The banks that loaned him $13 billion to close the deal were forced to hold that debt on their balance sheets for two years because they could not offload it. While the debt sold in full and on time, it received modest demand from investors, all five people said. Investors submitted orders for roughly 1.5 times the amount of debt available, according to the first two people briefed on the deal. Most similar junk bond deals have typically attracted orders for 2.5 to 3 times the loans and bonds being offered, the people said. Unlike Musk's debt deal when he acquired Twitter, Morgan Stanley did not guarantee how much it would sell or commit its own capital to the deal, in what is called a "best efforts" transaction, according to one person familiar with the terms. In the Twitter acquisition, the banks ended up making money on the debt, selling it with little-to-no discount months after Trump won the White House and Musk's influence in Washington grew. Apart from selling debt, xAI has also been in talks to raise about $20 billion in equity, valuing the company at more than $120 billion, with some investors placing valuations as high as $200 billion, Reuters reported last week.

Elon Musk responds to report that xAI is burning through $1 billion a month

In brief: Elon Musk's artificial intelligence startup, xAI, is burning through cash at an astounding rate. According to a new report, the company expects to spend at least $13 billion throughout all of 2025, equivalent to just over $1 billion every month. Musk, of course, has called the report "nonsense." Citing the usual anonymous people familiar with the matter, Bloomberg writes that the $500 million that xAI will earn this year looks positively tiny next to the $13 billion it plans to spend. The company is also expecting to receive a $650 million rebate from a hardware manufacturer. The publication also claims that of the $14 billion xAI has raised since 2023, only $4 billion remained in the first quarter of 2025, and it will be almost depleted in Q2. xAI has told investors that it is now finalizing $4.3 billion in new equity funding, and it has plans to raise another $6.4 billion of capital next year. That's on top of the $5 billion in debt that Morgan Stanley is reportedly helping it to raise. The sources said that the corporate debt is expected to help pay for xAI's data center development. xAI has famously spent billions on its data centers as it competes with established industry giants like OpenAI. One of its facilities, the Memphis Supercluster, is filled with 200,000 Nvidia Hopper GPUs. The AI Colossus supercomputer is also backed up with 150MW of Tesla Megapack Batteries. Musk previously said he plans to expand Colossus to over one million GPUs. With each one priced at tens of thousands of dollars, the cost of such an undertaking could be between $50 billion and $62.5 billion. Musk has been uncharacteristically subdued in his response to the report. He replied to a user post on X that stated "People really have no idea what's at stake" with "They don't. Also, Bloomberg is talking nonsense." The world's richest man doesn't usually hold back when it comes to slamming these reports. He was positively apoplectic over claims that the Tesla board was hunting for a new CEO. He also slammed reports that he was leaving his government role over a falling out with Trump - just before he had a massive falling out with Trump. xAI's valuation reached $80 billion in the first quarter of 2025, a considerable increase compared to the $51 billion valuation at the end of 2024. It's helped attract investors such as Andreessen Horowitz, Sequoia Capital, and VY Capital. Some of the most positive predictions say it will finally make a profit in 2027. That would beat OpenAI's profit timeline, which predicts it will be in the black in 2029.

Elon Musk's xAI Is Reportedly Burning Through $1 Billion a Month

Elon Musk has promised that his AI business, xAI, will help to revolutionize society. Before it can do that, however, the company is going to need to become fiscally viableâ€"a goal it hasn't quite met yet. Indeed, at the current moment, the company seems to be burning through cash at a rate that, in any other industry, would be entirely unsustainable. A new report from Bloomberg claims that the AI company expects to spend at least $13 billion this year, which amounts to a little over a billion dollars per month. The outlet cites "people familiar with the deal terms who asked not to be identified because the information is private." At the same time, the company continues to raise massive amounts of money from investors to keep up with its mind-boggling cash flows. The outlet reports: The company is now finalizing $4.3 billion in new equity funding, and it already has plans to raise another $6.4 billion of capital next year, the company has told investors. And that is on top of the $5 billion in debt that Bloomberg has previously reported Morgan Stanley is helping it raise. The corporate debt is expected to help pay for xAI’s data center development, the people said. Other companies have decided to do project financing instead. It was recently reported that xAI had gotten a generous infusion of investment from some of Silicon Valley's top venture capital firms (including Google-backer Sequoia). Bloomberg notes, however, that despite the company's "prolific fundraising efforts," it is just "barely keeping pace with expenses" due to its immense cash burn. Gizmodo reached out to xAI for more information. What is the company doing with all that money? xAI's main contribution to society so far is Grok, Musk’s “anti-woke†chatbot that is, sometimes, surprisingly woke. Grok has raised eyebrows in the past, with its unprompted rants about “white genocide.†The company merged with X (the company formerly known as Twitter, which Musk bought in 2022) earlier this year. Bloomberg's new report notes that xAI hopes to use X's ongoing data flows (from its zillions of user- and bot-generated posts) to help continually train Grok's algorithm. xAI may be owned by the richest man in the world, but the company is really viewed as an underdog when it comes to the current race for AI supremacy. Musk's company is in pitched battle against a number of other, better-positioned, better-resourced firms (like OpenAI, Meta, and Anthropic), all of which are seeking to crown themselves the definitive king of the AI boom. As per usual, Musk has made big promises about what he believes his companies can deliver in the realm of automation, robotics, and generative AI. He has claimed that his company will eventually create a product line of domestic robots that will take care of Americans’ household tasks, and, more recently, he has promised to launch a robotaxi business. Hyperbole aside, it remains to be seen whether Musk's company will even be able to survive these early, cash-hungry stages of its business lifecycle.

Elon Musk's xAI Seeks $4.3 Billion in Fresh Funding: Bloomberg - Decrypt

Musk's xAI recently acquired the social platform X and has reportedly spent most of its prior $14 billion haul. Elon Musk's artificial intelligence startup, xAI, is seeking $4.3 billion in new equity financing, Bloomberg reports, signaling an aggressive expansion push for the company. The latest funding comes in addition to a separate $5 billion debt financing plan announced earlier this month. The fundraises underscore Musk's renewed focus on building out his AI ventures after leaving the Trump administration and the Department of Government Efficiency (aka DOGE) in May. Last year, xAI raised $6 billion in a Series B round in May and another $6 billion in a Series C round in December, which included investments from Andreessen Horowitz, Sequoia Capital, Fidelity, BlackRock, the Qatar Investment Authority, and Kingdom Holding Company. Following the Series C funding round, xAI was valued at $50 billion. In March, xAI acquired X (formerly Twitter), Musk's social media platform, through an all-stock transaction, granting xAI access to a massive real-time data stream for training its AI systems. At the time of the acquisition, the combined value of xAI and X stood at $113 billion. The company has also invested heavily in hardware, building a supercomputer nicknamed Colossus, which is expected to use more than 200,000 GPUs. "This isn't a hype cycle. It's a capital regime shift -- one where AI isn't the bubble; it is the system," Shay Boloor, chief market strategist at the Futurum Group, told Decrypt. "Musk just showed us the going rate to play: $9.3 billion and counting." While the specifics of the investor composition remain undisclosed, the combined $9.3 billion financing package, comprising both debt and equity, will finance xAI's expansion into larger data centers and the continued deployment of its flagship chatbot, Grok. According to investor briefings cited by Bloomberg, xAI has already spent the majority of the $14 billion it raised prior to this latest fundraising effort. "This is infrastructure capital -- poured into GPUs, training runs, and the bandwidth layer that turns AI hype into functionality," Boloor added. "Musk isn't building an app; he's buying the base layer. And he's betting that whoever controls computing power controls the future."

Musk 'in Talks' to Finalise $4.3 billion in New Equity Funding for xAI | AIM

Despite raising $14 billion since 2023, the company is under financial strain. Elon Musk's AI startup xAI is in talks to finalise $4.3 billion in new equity funding and has plans to raise another $6.4 billion in capital for the next year, the company has told investors, according to a report by Bloomberg. Additionally, Morgan Stanley is helping secure an additional $5 billion in debt, as previously reported, to finance the development of xAI's data centres. Other companies are opting for project financing instead. The company is working to raise enough funds to cover its significant expenses. Since its founding in 2023, it has raised $14 billion in equity, but only $4 billion remained at the start of the first quarter. People familiar with the matter told Bloomberg that the company expects to use nearly all of that in the second quarter. Furthermore, the report indicated that xAI may receive a $650 million rebate from one of its suppliers, which will help the company reduce expenses. XAI, which purchased X earlier this year, is believed to have a valuation of $80 billion by the conclusion of the first quarter, an increase from $51 billion at the close of 2024. According to the media outlet, xAI is also losing $1 billion monthly as costs for advanced AI models exceed limited revenues. This rapid cash burn underscores the significant financial challenges in the AI industry, particularly for xAI, where revenue has been slow to generate. The company plans to spend over half of it in the next three months, even before receiving the money. xAI, which drives chatbot Grok, anticipates a cash burn of approximately $13 billion throughout 2025, as indicated in the firm's levered cash flow information provided to investors. Consequently, its extensive fundraising initiatives are just managing to match its costs, as noted by the sources. However, commenting on the cash burn, Musk replied to a post on his social media platform X, saying, "Bloomberg is talking nonsense."

Musk's xAI seeks to raise $6.6b in further PE funding

Gift 5 articles to anyone you choose each month when you subscribe. Elon Musk's artificial intelligence startup xAI is in talks to raise $US4.3 billion ($6.6 billion) through an equity investment on top of the $US5 billion 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.

Musk's xAI burns through $1 billion a month as costs pile up

Elon Musk's xAI is burning $1 billion monthly, with plans to spend $13 billion in 2025 despite limited revenue. To stay afloat, it's raising $9.3 billion in funding. High infrastructure costs and intense competition challenge profitability, though xAI hopes to break even by 2027.Elon Musk's artificial intelligence startup xAI is burning through $1 billion a month as the cost of building its advanced AI models races ahead of the limited revenues, according to people briefed on the company's financials. The rate at which the company is bleeding cash provides a stark illustration of the unprecedented financial demands of the artificial intelligence industry, particularly at xAI, where revenues have been slow to materialize. To cover the gap, Musk's startup is currently trying to raise $9.3 billion in debt and equity, according to people briefed on the deal terms, who asked not to be identified because the information is private. But even before the money is in the bank, the company has plans to spend more than half of it in just the next three months, the people said. Over the course of 2025, xAI, which is responsible for the AI-powered chatbot Grok, expects to burn through about $13 billion, as reflected in the company's levered cash flow, according to details shared with investors. As a result, its prolific fundraising efforts are just barely keeping pace with expenses, the people added. A spokesperson for the company declined to comment. However, Musk said "Bloomberg is talking nonsense" in a response to a post on his social media platform X that referenced Bloomberg's article. The losses are due, in part, to the huge costs that all AI companies face as they build the server farms and buy the specialized computer chips that are needed to train advanced AI models like Grok and ChatGPT. Carlyle Group Inc. estimates that over $1.8 trillion of capital will be deployed by 2030 to meet that demand to build out AI infrastructure, Chief Executive Officer Harvey Schwartz wrote in a shareholder letter. "Model builders will look to raise debt and they're going to burn lots and lots of cash," said Jordan Chalfin, senior analyst and head of technology at CreditSights. "The space is very competitive and they are battling for technical supremacy." But Musk's entrant in the AI race has struggled to develop revenue streams at the same rate as some of its direct competitors, like OpenAI and Anthropic. While almost none of these companies offer public figures on their finances, Bloomberg has previously reported that OpenAI, the creator of ChatGPT, is expecting to bring in revenues of $12.7 billion this year. At xAI, revenues are expected to be just $500 million this year, rising to north of $2 billion next year, investors were recently told. Listen and subscribe to Elon, Inc. on Apple, Spotify, iHeart and the Bloomberg Terminal. What xAI has on its side is a CEO, Musk, who is the richest man in the world, and one who has shown a willingness to spend his fortune on huge, futuristic projects long before they start generating money. Back in 2017, Musk's biggest company, Tesla Inc. was burning through $1 billion a quarter to pay for the production of its Model 3 car, Bloomberg reported at the time. SpaceX, meanwhile, sustained years of steady losses as it pushed toward its long-term goal of interplanetary exploration. Even against this backdrop, though, the huge losses at xAI stand out. Musk's team at xAI, which is racing to develop AI that can compete with humans, believes that they have advantages that will eventually allow them to catch up with peers. While some competitors rent chips and server space, xAI is paying for much of the infrastructure itself and getting direct access through X, which previously bought a significant stockpile of the most coveted and high powered computer chips. Musk has said that he expects xAI will continue buying more chips. X Factor After recently merging with X, Musk's AI executives are also hopeful that they will be able to train the company's models on the social media network's copious and constantly-refreshed archives, rather than paying for data sets like other AI companies. These potential advantages have led xAI to optimistically project that it will be profitable by 2027, people familiar with the matter said. OpenAI expects to be cashflow positive by 2029, Bloomberg previously reported. These projections, along with Musk's celebrity status and political power, have been enough to win over many investors, especially before the recent breakdown in the relationship between Musk and President Donald Trump. Potential xAI investors were told that the company's valuation grew to $80 billion at the end of the first quarter, up from $51 billion at the end of 2024. Investors have included Andreessen Horowitz, Sequoia Capital and VY Capital. For now, though, xAI is racing to raise enough money to keep up with its prodigious expenditures. Between its founding in 2023 and June of this year, xAI raised $14 billion of equity, people briefed on the financials said. Of that, just $4 billion was left at the beginning of the first quarter, and the company expected to spend almost all of that remaining money in the second quarter, the people said. The company is now finalizing $4.3 billion in new equity funding, and it already has plans to raise another $6.4 billion of capital next year, the company has told investors. And that is on top of the $5 billion in debt that Bloomberg has previously reported Morgan Stanley is helping it raise. The corporate debt is expected to help pay for xAI's data center development, the people said. Other companies have decided to do project financing instead. The company is also expecting to get a bit of help from a $650 million rebate from one of its manufacturers, it told investors this week. There were early signs that investors were hesitant to loan the company money at the proposed terms, Bloomberg has reported. The company gave select investors more detailed financial information on Monday in response to questions it had faced during the fundraising process, people familiar with the negotiations said. But the deal has attracted more interest since the company changed some of the deal terms -- to be more investor friendly -- and finalized the equity fundraising. A spokesperson for Morgan Stanley, the bank in charge of xAI's debt sale, declined to comment.

Musk's xAI in talks for $4 billion equity funding: Report

Elon Musk's xAI is seeking $4.3 billion in equity funding, alongside a $5 billion debt sale, amid rising AI development costs. Having raised $14 billion earlier, xAI has reportedly spent most of it. The Grok chatbot maker is now valued at $80 billion, per Bloomberg.Elon Musk's artificial intelligence startup xAI is in talks to raise $4.3 billion through an equity investment on top of its $5 billion debt funding plans, Bloomberg News reported on Tuesday, citing information shared with investors. Between its founding in 2023 and when the debt sale was launched this year, xAI raised $14 billion through equity fundraising, the report said. Training and deploying advanced AI systems are exceedingly expensive, driven by costly hardware, intensive compute and the need for skilled employees in a fiercely competitive market. The Grok chatbot maker needs new funding, partly because it has already spent most of what it previously raised, according to the report. Morgan Stanley, the bank in charge of the debt sale, declined to comment, while xAI did not immediately respond to Reuters' requests for comment. Commitments for the $5 billion debt sale are due Tuesday, the report said, citing a person with knowledge of the matter. Additionally, xAI may also get a $650 million rebate from one of its manufacturers that will help the firm cut costs, according to the report. XAI, which acquired X earlier this year, is said to have a valuation of $80 billion at the end of the first quarter, up from $51 billion at the end of 2024, the report said. Rival OpenAI had said in March it would raise up to $40 billion at a $300 billion valuation in a new funding round led by SoftBank Group. Musk cofounded OpenAI in 2015, but stepped down from the company's board in 2018.

Elon Musk's xAI Seeks $5 Billion In Debt, Faces Lukewarm Demand -- Even With 12% Yields On The Table

Enter your email to get Benzinga's ultimate morning update: The PreMarket Activity Newsletter Elon Musk's AI venture, xAI, is reportedly on the brink of securing a $5 billion debt raise, led by Morgan Stanley, despite modest investor interest. What Happened: The $5 billion debt offering -- comprising a floating-rate term loan, a fixed-rate loan, and secured bonds -- is scheduled to be allocated to investors on Wednesday, reported Reuters, citing sources. The sale, announced on June 2, failed to generate strong interest from high-yield and leveraged loan investors. The floating-rate loan carries an interest rate of 700 basis points above the Secured Overnight Financing Rate, while the fixed-rate loan and secured notes are expected to yield around 12%, according to the report. This is significantly above the average yield-to-maturity for high-yield bonds, which stood at 7.6% as of Monday's close. Investor orders were approximately 1.5 times the available debt, lower than the usual 2.5 to 3 times observed in similar junk bond deals. Unlike Musk's debt deal for his Twitter acquisition, Morgan Stanley neither guaranteed the sale amount nor committed any of its own capital to the transaction, the report added. xAI did not immediately respond to Benzinga's request for comment. SEE ALSO: Elizabeth Warren Says Billionaires Like Jeff Bezos And Elon Musk Will 'Track Your Purchases' If Allowed To Launch Stablecoins, And Stick You With The Bill When It 'Blows Up' Why It Matters: The debt raise comes amid a series of significant developments for xAI. The company is also in discussions to raise approximately $20 billion in equity, potentially valuing the company at over $120 billion. This follows the current $5 billion debt package. xAI's debt raise also raises concerns due to the company's financial status and Musk's track record. The company is not yet rated, providing investors with little visibility into its finances and posing a higher risk. This is compounded by Musk's previous debt experiences, such as when he financed his $44 billion acquisition of social media giant X, known as Twitter at the time, in 2022. READ MORE: Elon Musk Warns US Faces 'De Facto' Bankruptcy If $37 Trillion Debt Not Tackled, Peter Schiff Says, 'We Are Already Bankrupt' Image via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs

Musk's xAI Reportedly Burns $1 Billion Monthly: Why That Matters To AI Investors

Enter your email to get Benzinga's ultimate morning update: The PreMarket Activity Newsletter Elon Musk's ambitious artificial intelligence venture, xAI, is reportedly rapidly exhausting its financial reserves, with estimates suggesting a staggering monthly expenditure of approximately $1 billion, according to a recent report by Bloomberg. While the claim has been rebuked by Musk in an X post, the estimate isn't inconceivable. One X commentor noted, "If you got that number from the fact they raised $6 billion six months ago and have already spend it, they could've spend most of it in one go on GPUs." This underscores the extraordinary capital demands of developing sophisticated AI systems in today's fiercely competitive landscape, raising crucial questions for investors regarding the long-term viability of AI startups operating outside the umbrella of tech giants with deep pockets. The Reportedly Billion-Dollar Monthly Burn Founded in 2023, xAI emerged as Musk's response to the perceived ideological bias in existing AI systems. The company's flagship product, Grok, was designed to compete with OpenAI's ChatGPT and Google's Bard (now Gemini), but the pursuit of cutting-edge AI technology comes with a hefty price tag. This reportedly $1 billion monthly expenditure likely stems from the substantial computing infrastructure required to train large language models (LLMs). The Economic Times report indicates that xAI's costs are predominantly directed toward purchasing and operating the necessary hardware - specifically NVIDIA's advanced GPUs that have become the industry standard for AI training. The enormity of this endeavor is further compounded by the substantial energy requirements and corresponding costs. Funding Challenges and Valuation Questions Despite securing $6 billion in a funding round earlier this year, which valued the company at $24 billion, xAI's current burn rate (if reports can be believed), implies that this capital could be depleted in as little as six months without additional investment, presenting a harsh reality check for investors who have been pouring money into AI startups at increasingly lofty valuations. This situation is not unique to xAI, as the AI sector as a whole is characterized by astronomical valuations coupled with equally substantial operating costs. For instance, OpenAI reportedly operates with a monthly burn rate of approximately $700 million, although it has reported over $10 billion in annual revenue and is valued at over $80 billion. Anthropic, another major player in the AI landscape, has secured significant backing from Amazon and Google, highlighting the capital-intensive nature of this industry. As Sarah Johnson, AI investment analyst at Morgan Stanley, observed in a recent research note, "We're witnessing a capital-intensive race that favors organizations with either massive funding rounds or the backing of tech giants with effectively unlimited resources." This raises significant challenges for independent players, which must navigate the complexities of sustaining operations without continuous capital infusion. Strategic Implications for AI Investors For investors in the AI sector, xAI's financial situation per reports, offers several important insights. Firstly, the enormous infrastructure costs associated with AI development create significant barriers to entry, potentially limiting the field to well-funded startups and established tech companies. This, in turn, suggests that infrastructure providers like NVIDIA may represent more stable investment opportunities than AI startups themselves. Furthermore, the reportedly high burn rates across the industry imply that consolidation is likely, with smaller players either being acquired or failing to secure the necessary funding to compete. The scarcity of technical talent in the AI space continues to drive up operational costs, as the limited pool of AI researchers capable of developing cutting-edge models commands premium salaries. Moreover, despite the hype surrounding generative AI, few companies have demonstrated sustainable business models, with xAI's Grok chatbot currently available to premium subscribers on X (formerly Twitter) generating insufficient revenue to offset development costs. Musk's Unique Position Elon Musk's unique position, with his personal wealth and control of multiple companies, creates a distinct dynamic for xAI. Unlike other startups facing similar challenges, xAI has the potential to tap into Musk's personal resources or leverage synergies with his other ventures. As tech analyst Ben Thompson noted in his Stratechery newsletter, "Musk has demonstrated a willingness to personally fund his priorities in the past; the question now is how much he's willing to commit to xAI when his attention is divided across multiple companies." The Competitive Landscape xAI's financial predicaments must be contextualized within the broader competitive landscape, where OpenAI continues to reign supreme in the consumer-facing generative AI market with ChatGPT, bolstered by Microsoft's substantial investment and computing resources. Meanwhile, Google's Gemini models and Anthropic's Claude have also garnered significant traction, further intensifying the competition. To justify its valuation and attract additional investment, xAI must demonstrate a meaningful differentiation from these established players, which has proven to be a daunting task. Although Grok has garnered attention for its less-filtered responses compared to its competitors, it has yet to demonstrate technological superiority that would justify the enormous development costs incurred thus far. Still, that's not stopping venture capital firms like TPG, Sequoia and others to consider investing up to $250 Million in xAI, according to recent reports. Navigating the Uncertain Future: Key Indicators for Investors As the AI landscape continues to evolve at a breakneck pace, investors should remain vigilant and monitor several key indicators that will shape xAI's financial outlook. These include: Funding Announcements: The announcement of additional funding rounds for xAI would be a significant indicator of continued investor confidence, despite the reportedly high burn rate, which has raised concerns among stakeholders. Technical Benchmarks: Independent evaluations of Grok compared to its competitors will provide valuable insights into whether xAI's massive investment is yielding tangible technological advantages, thereby justifying its enormous development costs. Monetization Strategies: The development of new revenue streams beyond X premium subscriptions would significantly improve the company's financial prospects, enabling it to sustain its operations and continue investing in AI research and development. Regulatory Developments: The increasing regulatory scrutiny of AI could have a disproportionate impact on smaller players, which may lack the resources to navigate the complex compliance requirements, thereby exacerbating their financial challenges. Looking Forward The AI sector's economics continue to evolve rapidly, with the true winners and losers yet to be determined. For investors, xAI's financial situation (if reports were to be believed), serves as a cautionary tale about the capital-intensive nature of AI development, while also highlighting the significant challenges that even visionaries like Elon Musk face in this fiercely competitive landscape. Market News and Data brought to you by Benzinga APIs

Elon Musk's xAI Expects to Spend $13 Billion in 2025 | PYMNTS.com

By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions. The company shared this data with investors while working to raise $9.3 billion in debt and equity, Bloomberg reported Tuesday (June 17), citing unnamed sources. XAI did not immediately reply to PYMNTS' request for comment. The rate at which the company is raising money and spending it is common across the AI industry, due to the financial demands of the technology, which requires server farms and specialized chips, according to the report. XAI has been keeping pace with these demands by raising funds, the report said. It also has the support of Musk, the world's richest man, who has a history of investing in companies long before they start making money. The company also has the potential advantages of access to chips through Musk's social media company, X, which stockpiled them, and the possibility of training its AI models on X's archives now that the two companies have merged, per the report. XAI has projected that it will be profitable by 2027, and it told potential investors that its valuation rose from $51 billion at the end of 2024 to $80 billion at the end of the first quarter, according to the report. It was reported in May that xAI's generative AI tool, Grok, saw fast growth starting in late February, thanks to the release of Grok 3, and had around 8 million daily average visits. On May 6, xAI and Palantir announced that they had teamed up to explore how financial services firms can employ AI. The partnership's current offerings include an "agentic workforce" that the companies described as "modular AI agents tailored to specific business processes," with a "deep focus on orchestration across and between functions" to deliver things like revenue generation and cost reduction. When xAI acquired X in March, Musk said the companies' futures are intertwined. "Today, we officially take the step to combine the data, models, compute, distribution and talent," Musk said. "This combination will unlock immense potential by blending xAI's advanced AI capability and expertise with X's massive reach."

Elon Musk's xAI aims to raise $4.3B in equity funding: report

Elon Musk's artificial intelligence firm xAI is reportedly in talks to raise $4.3 billion in a new equity investment round. The company behind snarky AI chatbot Grok has told investors that it needs the money in part because it has burned through cash it had previously raised, Bloomberg reported, citing materials it had obtained that were shared with potential investors. xAI is pursuing the equity investment in addition to its plans to borrow $5 billion from debt investors, the report added. Morgan Stanley is leading the debt sale, with commitments from participants due by Tuesday. The debt sale reportedly hit a snag after Musk's very public war of words with President Trump. However, xAI has made concessions to entice investors that may have been spooked by the feud between the former DOGE cost-cutter and Trump -- such as placing a limit on the amount of secured debt it can raise, according to Bloomberg. While Musk recently moved to merge xAI with his social media platform X, formerly known as Twitter, the new funds will go toward AI operations, the report said. Representatives for xAI did not immediately return The Post's request for comment. The AI startup had raised $14 billion in equity fundraising since its launch in 2023, according to Bloomberg. However, xAI was said to be down to $4 billion as of March 31. The company raised $6 billion from investors as recently as December. The mogul's company is locked in intense competition with well-funded rivals like Sam Altman's OpenAI, Mark Zuckerberg's Meta and Sundar Pichai's Google to win the race to develop advanced AI. All of the firms have poured tens of billions of dollars into efforts to build out the AI data centers and other infrastructure required to train and power the large-language models that underpin their AI products. XAI has told investors that it has an $80 billion valuation as of the first quarter of this year - up from $51 billion at the end of last year.

Exclusive-Musk's xAI on track to raise $5 billion in fresh debt, following modest demand

NEW YORK (Reuters) -Elon Musk's xAI is on track to close on a $5 billion debt raise led by Morgan Stanley, despite tepid investor demand, according to two people familiar with the matter. The $5 billion debt sale, which includes a floating-rate term loan, a fixed-rate loan and secured bonds, will be allocated to investors on Wednesday, the two people said, asking not to be identified because the deal is private. xAI did not immediately respond to a request for comment while Morgan Stanley declined. The xAI offering, which was reported on June 2 as Musk and U.S. President Donald Trump traded barbs over social media, did not receive overwhelming interest from high-yield and leveraged loan investors, said five people briefed on the deal. The floating-rate loan will be offered with an interest rate of 700 basis points over the Secured Overnight Financing Rate, a benchmark rate used to price bond deals, while the fixed-rate loan and secured notes will pay a yield of roughly 12%, the two people said. The average yield-to-maturity on high-yield bonds closed Monday at 7.6%, according to the ICE BofA High Yield Index. Musk's AI company has to pay significantly more since xAI and its debt are not yet rated, giving investors little visibility into the company's finances and higher risk. Three bond investors who were offered the debt told Reuters they declined to invest. One of these investors noted that xAI has not yet turned a profit and the debt is not rated. They were especially reticent given Musk's track record when he financed his $44 billion acquisition of social media giant X, known at the time as Twitter, in 2022. The banks that loaned him $13 billion to close the deal were forced to hold that debt on their balance sheets for two years because they could not offload it. While the debt sold in full and on time, it received modest demand from investors, all five people said. Investors submitted orders for roughly 1.5 times the amount of debt available, according to the first two people briefed on the deal. Most similar junk bond deals have typically attracted orders for 2.5 to 3 times the loans and bonds being offered, the people said. Unlike Musk's debt deal when he acquired Twitter, Morgan Stanley did not guarantee how much it would sell or commit its own capital to the deal, in what is called a "best efforts" transaction, according to one person familiar with the terms. In the Twitter acquisition, the banks ended up making money on the debt, selling it with little-to-no discount months after Trump won the White House and Musk's influence in Washington grew. Apart from selling debt, xAI has also been in talks to raise about $20 billion in equity, valuing the company at more than $120 billion, with some investors placing valuations as high as $200 billion, Reuters reported last week. (Reporting by Matt Tracy, Echo Wang and Davide Barbuscia; Additional reporting by Tatiana Bautzer; Editing by Chizu Nomiyama and Stephen Coates)

The start-up xAI discussing record fundraising led by Elon Musk.

xAI, Elon Musk's ambitious artificial intelligence start-up, is preparing to make another major financial move. The young company, already backed by several billion dollars, is negotiating a $4.3bn equity financing round, alongside a $5bn loan. The goal: to fuel a frantic technological race where billions evaporate as quickly as GPUs are installed. Elon Musk's artificial intelligence company, xAI, is reportedly in talks to raise an additional $4.3bn in equity, on top of the $5bn already targeted through a debt offering, according to Bloomberg News on Tuesday, as per information from documents shared with investors. Since its inception in 2023 until the recent launch of this debt financing, xAI has already raised $14bn in capital, the report says. The financing needs reflect the high cost of developing advanced AI systems, which require expensive hardware infrastructure, massive computing power, and rare talent in a highly competitive market. According to the sources cited, xAI has already spent a large portion of the funds previously raised. Commitments for the $5bn debt raise are expected on Tuesday, according to a source familiar with the matter. In addition, xAI could benefit from a $650m discount from one of its manufacturers, which would reduce certain costs. xAI, which acquired the X platform (formerly Twitter) earlier this year, was valued at $80 billion at the end of the first quarter of 2025, up from $51bn at the end of 2024. By comparison, its rival OpenAI announced in March that it wanted to raise up to $40 billion based on a valuation of $300 billion in a funding round led by Japanese group SoftBank.

Musk's xAI in talks for $4.3 billion equity funding, Bloomberg News reports

(Reuters) -Elon Musk's AI startup xAI is in talks to raise $4.3 billion through an equity investment on top of its $5 billion debt funding plans, Bloomberg News reported on Tuesday, citing information shared with investors. Between its founding in 2023 and when the debt sale was launched this year, xAI raised $14 billion through equity fundraising, the report said. The Grok chatbot maker needs new funding, partly because it has already spent most of what it previously raised, according to the report. XAI did not immediately respond to Reuters' request for comment. (Reporting by Jaspreet Singh in Bengaluru; Editing by Leroy Leo)