July 1, 2025
Elon Musk's xAI raises  billion in debt and equity as it steps up challenge to OpenAI
The funding will go towards xAI's efforts to build out its AI infrastructure and develop its Grok chatbot.

Elon Musk announced his new company xAI, which he says has the goal to understand the true nature of the universe.

Jaap Arriens | Nurphoto | Getty Images

XAI, the artificial intelligence startup run by Elon Musk, raised a combined $10 billion in debt and equity, Morgan Stanley said.

Half of that sum was clinched through secured notes and term loans, while a separate $5 billion was secured through strategic equity investment, the bank said on Monday.

The funding gives xAI more firepower to build out infrastructure and develop its Grok AI chatbot as it looks to compete with bitter rival OpenAI, as well as with a swathe of other players including Amazon-backed Anthropic.

In May, Musk told CNBC that xAI has already installed 200,000 graphics processing units (GPUs) at its Colossus facility in Memphis, Tennessee. Colossus is xAI’s supercomputer that trains the firm’s AI. Musk at the time said that his company will continue buying chips from semiconductor giants Nvidia and AMD and that xAI is planning a 1-million-GPU facility outside of Memphis.

Addressing the latest funds raised by the company, Morgan Stanley that “the proceeds will support xAI’s continued development of cutting-edge AI solutions, including one of the world’s largest data center and its flagship Grok platform.”

xAI continues to release updates to Grok and unveiled the Grok 3 AI model in February. Musk has sought to boost the use of Grok by integrating the AI model with the X social media platform, formerly known as Twitter. In March, xAI acquired X in a deal that valued the site at $33 billion and the AI firm at $80 billion. It’s unclear if the new equity raise has changed that valuation.

xAI was not immediately available for comment.

Last year, xAI raised $6 billion at a valuation of $50 billion, CNBC reported.

Morgan Stanley said the latest debt offering was “oversubscribed and included prominent global debt investors.”

Competition among American AI startups is intensifying, with companies raising huge amounts of funding to buy chips and build infrastructure.

OpenAI in March closed a $40 billion financing round that valued the ChatGPT developer at $300 billion. Its big investors include Microsoft and Japan’s SoftBank.

Anthropic, the developer of the Claude chatbot, closed a funding round in March that valued the firm at $61.5 billion. The company then received a five-year $2.5 billion revolving credit line in May.

Musk has called Grok a “maximally truth-seeking” AI that is also “anti-woke,” in a bid to set it apart from its rivals. But this has not come without its fair share of controversy. Earlier this year, Grok responded to user queries with unrelated comments about the controversial topic of “white genocide” and South Africa.

Musk has also clashed with fellow AI leaders, including OpenAI’s Sam Altman. Most famously, Musk claimed that OpenAI, which he co-founded, has deviated from its original mission of developing AI to benefit humanity as a nonprofit and is instead focused on commercial success. In February, Musk alongside a group of investors, put in a bid of $97.4 billion to buy control of OpenAI. Altman swiftly rejected the offer.

CNBC’s Lora Kolodny and Jonathan Vanian contributed to this report.