This comes just a day after he floated the possibility of Tesla shareholders voting on whether the automaker should invest in xAI, a change that could increase ties between the two companies without formally merging them. 

“It would be great if Tesla could invest,” he noted earlier, but stressed that shareholder approval would be necessary.

Despite the speculation, Tesla and xAI have yet to issue official statements addressing the merger rumours or clarifying their future relationship.

xAI, Musk’s AI startup behind the controversial Grok chatbot, has grown aggressively since its $33 billion acquisition of X (formerly Twitter) in March 2025. 

That acquisition placed the combined group’s valuation at $80 billion, but sources told Reuters that xAI had discussed valuations as high as $200 billion in its latest funding talks. 

Whether those numbers show the company’s real market potential is still uncertain, as Musk has publicly downplayed suggestions of a fresh capital raise: “We have plenty of capital.”

What is apparent, however, is that xAI is positioning itself as the AI backbone of Musk’s expanding industrial network. Its Grok chatbot has already been deployed in Starlink’s customer support operations, with integration into Tesla’s Optimus robots also on the horizon.

On X, Grok facilitates real-time interactions, further tightening the web of Musk-owned enterprises.

In July 2025, xAI raised $10 billion, half through equity led by Morgan Stanley and half through debt financing. Notably, SpaceX, another Musk company, contributed $2 billion to this round, marking its first known external investment into xAI. 

Reports from The Wall Street Journal indicated that SpaceX’s involvement was part of a $5 billion equity round. 

Operationally, xAI is pushing infrastructure goals. Its Memphis-based supercomputer, Colossus, already runs on over 200,000 GPUs, with plans to scale to one million. The firm is targeting $1 billion in revenue by the end of 2025 and forecasts $19 billion by 2029, supported by an $18 billion investment into its compute backbone.

Despite its commercial momentum, Grok stumbled in July when it produced antisemitic and offensive content, triggering a public apology and a promised codebase review. Still, Musk stands by the chatbot, calling it “the smartest AI in the world” and promising deeper integration across his companies.

From a governance standpoint, merging Tesla, a publicly traded company, with xAI, which remains private, could ignite regulatory challenges. Musk’s current strategy appears to favour operational integration over corporate consolidation. 

Embedding Grok into Tesla vehicles, Optimus robots, and Starlink services could offer the benefits of synergy without the legal complexities of a merger.

For now, Musk says Tesla will not merge with xAI. But as history shows, in Musk’s empire, “no” today doesn’t always mean “never.”

According to regulatory filings with the US Securities and Exchange Commission (SEC), the funding involved contributions from 97 investors. 

However, the filing did not disclose the identities of the backers or provide specific details about the company’s valuation.

The funding round comes as xAI works towards competing with companies like OpenAI and Anthropic. xAI is channelling resources into expanding its supercomputing capabilities in Memphis, Tennessee, with the facility now housing over 100,000 Nvidia GPUs. 

The centre, initially constructed in just 122 days, is expected to receive significant upgrades next year, including an additional 150MW power capacity.

xAI, founded by Musk last year, has launched its proprietary generative AI model, Grok, which powers features on X (formerly Twitter). 

Grok has received attention for its willingness to tackle unconventional topics, distinguishing it from other AI systems. Musk claims the model is “maximally truth-seeking” and less biased compared to competitors.

In addition to its integration with X, Grok has been embedded into third-party applications via an API launched in October. The company is reportedly developing a standalone app to rival OpenAI’s offerings, set for release in December.

xAI’s business model also leverages synergies across Musk’s other ventures. The AI startup contributes to customer support for SpaceX’s Starlink service and is in discussions with Tesla for research and development collaborations. 

Issues have been raised by Tesla shareholders and others, about possible conflicts of interest, alleging that Musk is diverting resources from Tesla to xAI.

Musk has placed xAI as a challenger to OpenAI, a company he co-founded but left in 2018. In a current lawsuit, Musk accuses OpenAI of a monopoly that hinders competition in the AI space. The suit also reveals the strategic advantage OpenAI gains from its partnership with Microsoft.

With these challenges, Musk asserts that xAI’s access to data from X provides a competitive edge. The company recently updated X’s privacy policy, allowing xAI to train its models using social media content.

Since its inception, xAI has grown from a small team to over 100 employees. The company recently relocated to larger offices in San Francisco and plans to raise additional funds in 2025 to sustain its rapid expansion.

The AI funding sector is now highly competitive, with companies like Anthropic and OpenAI securing billions in recent months.

However, Musk’s vision for xAI, coupled with its integration across multiple industries, makes the startup strong in the AI space.