Musk’s AI venture xAI has completed an extensive financing operation, raising $5 billion in debt and a further $5 billion in strategic equity. This landmark fundraising will help finance the company’s flagship Grok AI platform and accelerate development of data-centre infrastructure vital to its next growth phase.
The $5 billion debt package, consisting of secured notes and term loans structured by Morgan Stanley, attracted strong demand and was oversubscribed by major global debt investors. Floating-rate term loans offer 700 bps over SOFR, while fixed-rate notes pay approximately 12 %–12.5 % yields.
Despite initial investor hesitation, including some banks opting out, the offering was filled with roughly 1.5x subscribed interest. In parallel, xAI has closed a $5 billion strategic equity round, marking an aggressive move into AI scale‑up territory. The latest and prior rounds have attracted top-tier investors, including Andreessen Horowitz, Sequoia, VY Capital, BlackRock, Fidelity, NVIDIA, AMD, and the Saudi conglomerate Kingdom Holdings.
xAI ‘s debt, equity and valuation dynamics
In addition to the debt and initial equity raises, xAI has held discussions to secure up to $20 billion more in equity funding. Investors value the company between $120 billion and $200 billion. As of Q1 2025, xAI’s valuation climbed to $80 billion, with ongoing funding talks potentially pushing it higher.
Earlier, Bloomberg reported plans for a $4.3 billion equity round following the debt raise. Despite raising $14 billion in equity since 2023, xAI reportedly had only $4 billion left at the end of Q1 2025, most of which was expected to be spent by the end of Q2. This reflects a monthly cash burn rate of approximately $1 billion and projected 2025 losses of $13 billion. Current revenue for 2025 is expected to be about $500 million.
Fuelling xAI and data‑centre build‑out
The fresh capital supports multiple strategic priorities. The Grok AI model, integrated with Musk’s social media platform X, will benefit from enhanced compute scale. Meanwhile, xAI continues to expand its Colossus supercomputer in Memphis, which now boasts around 200,000 GPUs. Its ambition is to scale to 1 million GPUs, making it the largest AI cluster globally.
xAI has also purchased a second 1 million sq ft site in Memphis for further data centre expansion, which could host up to 350,000 GPUs. The data centres will feature what’s described as the world’s largest deployment of Tesla Megapack batteries for backup power.
Alongside hardware expansion, xAI forecasts $1 billion in revenue in 2025, aiming to jump to $14 billion by 2029, and projects a positive EBITDA by 2027.
Competing in a private‑credit pivot
This substantial private-credit funding marks a growing trend among AI-first players. Earlier in 2025, OpenAI-backed Blue Owl closed a $15 billion credit deal for its data centre needs, while SoftBank and Oracle have unveiled a $500 billion Stargate AI infrastructure programme.
xAI’s $5 billion debt raise, combined with a substantial equity infusion, places it among the largest private infrastructure financings on record, highlighting the strategic shift toward off‑balance-sheet capital solutions for large-scale AI investment.
Ambition meets execution
Founded in March 2023, xAI aims to rival leading AI entities like OpenAI and Anthropic. The company is also backed by Musk’s broader ecosystem of X and Tesla. Its Memphis-based Colossus is already one of the largest AI supercomputers globally. The Grok AI platform is being rapidly iterated, with Grok-3 launched in February 2025 and claims of outperforming OpenAI’s GPT-4 on specific benchmarks. Grok is integrated into X, with plans for further enterprise and API offerings.
Persistent criticisms around business viability and the high cost of rapid scale remain. Notably, investor interest in the debt side was tepid, and rates were elevated to clinch financing. Still, achieving debt and equity raises underscores investor confidence in xAI’s vision. Community concerns have also arisen in Memphis regarding air quality and power grid strain, with xAI planning to use a large-scale ceramic membrane bioreactor for wastewater cooling at its new data centres.
xAI’s aggressive expansion, heavy cash burn, and ambitious infrastructure build-out reflect the immense opportunity and significant risks in the race to dominate generative AI. The company’s recent fundraising, strategic partnerships, and rapid scaling efforts position it as a formidable challenger to incumbents. It also highlights the sector’s growing reliance on private credit and off-balance-sheet financing to fuel the next wave of AI innovation.
