Elon Musk’s artificial intelligence startup, xAI, has raised $10 billion in fresh funding, half through debt, half through equity, as it works to build out the infrastructure needed to compete with established companies in the AI arms race.
Morgan Stanley, which led the deal, confirmed on Monday that xAI had closed a $5 billion debt financing round made up of secured notes and term loans.
The deal, according to the bank, was oversubscribed and attracted major institutional investors across the globe.
Simultaneously, xAI closed a separate $5 billion strategic equity investment. Though the identities of the backers have not been disclosed, Bloomberg previously reported that the startup had been negotiating a $4.3 billion equity round with investors.
That conversation is part of a larger funding goal, Musk’s team is reportedly looking to raise as much as $20 billion in equity that could push the company’s valuation beyond $120 billion. Some insiders are even betting on a $200 billion ceiling.
The funds are earmarked for aggressive expansion. A key priority is scaling up computing infrastructure through data centres tailored to handle vast AI workloads.
The capital will also accelerate development of Grok, xAI’s core conversational platform integrated into X (formerly Twitter), and help the company move toward building its own custom chips, codenamed “Gigafab”, to reduce dependence on Nvidia’s high-demand GPUs.
Musk launched xAI in 2023 after parting ways with OpenAI, the company he co-founded. He has positioned xAI as a rival not just to OpenAI, but also to players like Google DeepMind and Anthropic.
His approach is more unorthodox, Grok is marketed as a “rebellious” chatbot, an alternative to the more filtered responses seen in other models.
The debt raise and equity injection together represent one of the largest combined funding moves by a private tech startup in recent memory.
It comes as global competition increases. OpenAI has a $51 billion partnership with Microsoft, while Amazon has poured $4 billion into Anthropic. These alliances are about access to compute power, chips, and distribution.
“The deal was oversubscribed and included prominent global debt investors,” Morgan Stanley stated in a post on X.
Musk has previously argued that building AGI, artificial general intelligence, requires vertical control over data, chips, energy, and distribution. This latest funding round gives xAI the firepower to attempt just that.
xAI has not issued a formal statement regarding the funding, and representatives did not respond to requests for comment at the time of filing.
But then, we see that Musk is going all-in on building a scalable AI ecosystem, and investors, despite earlier doubts, are willing to put serious money behind it.
