Musk's xAI in talks for $4.3 billion equity funding: Report

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 the launch of its debt sale earlier this year, xAI raised $14 billion through equity fundraising, the report said.

Training and deploying advanced AI systems is extremely expensive, with high cost tied to hardware, intensive compute and the need for skilled employees in a fiercely competitive market.

The Grok chatbot maker requires 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 a Reuters request for comment.

Musk's startup expects to burn through about $13 billion over the course of 2025 — more than $1 billion per month — as reflected in the company's levered cash flow, Bloomberg News reported later in the day, citing people familiar with the deal.

Commitments for the $5 billion debt sale are due Tuesday, the report from earlier 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 Bloomberg.

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 co-founded OpenAI in 2015, but stepped down from the company's board in 2018.