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.”

Morgan Stanley, the lead banker for xAI, is currently looking to raise $5 billion through a debt offering. In meetings held with prospective investors willing to commit a minimum of $50 million, the bank revealed selected internal figures outlining xAI’s long-term financial targets and current losses.

According to information shared with those investors, xAI generated $52 million in gross revenue during Q1 but recorded a loss of $341 million before interest, taxes, depreciation and amortisation (EBITDA). 

Cash flow from operations was negative $220 million. The company had already spent $2.6 billion on capital expenditures and has plans to spend another $18 billion on data centre investments.

Even with the deep red figures, xAI expects a sharp turnaround over the next five years. Forecasts presented show the company hitting $2.7 billion in EBITDA by 2027 and climbing to $13.1 billion by 2029. 

On the revenue side, the company aims to close 2025 with $1 billion in gross income and projects $14 billion by the end of 2029.

These figures come as xAI simultaneously seeks a $113 billion valuation through a separate $300 million equity raise. The materialisation of this may depend on Musk’s current political entanglements.

The backdrop to all this is a public clash between Musk and Donald Trump. What began as a difference of opinion over government contracts escalated into a volatile exchange. Musk ultimately declared: “Trump should be impeached.”

This fallout has introduced complications for Morgan Stanley’s fundraising efforts. Some investors are reportedly wary of potential political backlash, especially considering Trump’s history of targeting institutions and individuals who challenge him. 

At this stage, it’s undefined how much the conflict has affected xAI’s debt sale, though signs of market nervousness are evident. For instance, the price of a loan tied to X, another Musk-owned company, reportedly dropped by 1.25 points on the same day Musk’s comments were made public.

Efforts are reportedly underway to defuse the stress. According to Politico, the White House has scheduled a private call between Musk and Trump in a bid to ease hostilities.

While investor interest in generative AI remains high, the financial model for many startups is still viewed as a long-term bet. Most require massive upfront capital to build data infrastructure and hire elite AI talent. xAI is no exception. 

Neither Morgan Stanley nor xAI have issued formal comments regarding the funding round or the political situation as of the time of filing this report.