Elon Musk’s xAI raises $10 billion to fuel Grok AI and build a supercomputer to challenge OpenAI

Just two weeks after reports said Elon Musk’s AI startup xAI was aiming to raise $4.3 billion in equity on top of a $5 billion debt deal, Morgan Stanley confirmed Tuesday that the company has secured $10 billion in total funding to expand Grok AI and build massive GPU infrastructure.

Half of the haul came through secured notes and term loans. The other $5 billion came from strategic equity investors, the bank said Monday

Since its inception two years ago, xAI has already brought in $14 billion through equity fundraising. That figure doesn’t include the $5 billion in debt it’s currently seeking. Morgan Stanley is running point on the debt sale but declined to comment.

xAI’s cash burn appears to be catching up with it. Building and running advanced AI systems isn’t cheap—between the specialized hardware, massive compute resources, and talent wars, the costs pile up fast. According to the report, xAI has already gone through most of its previously raised capital.

xAI raises $10B in fresh funding as Musk escalates AI war with OpenAI and Anthropic

The fresh cash infusion gives xAI more room to grow its infrastructure and continue developing its Grok chatbot, which Musk has pitched as a more “truth-seeking” alternative to OpenAI’s ChatGPT. xAI is also competing with other well-funded rivals like Anthropic, backed by Amazon.

Per CNBC, Morgan Stanley stated that “the proceeds will support xAI’s continued development of cutting-edge AI solutions, including one of the world’s largest data centers and its flagship Grok platform.”

In May, Musk told CNBC in an interview that xAI had already deployed 200,000 GPUs at its Colossus facility in Memphis, Tennessee—a supercomputer built to train its AI models. He added that xAI plans to build a facility with 1 million GPUs just outside the city. The company is sourcing chips from Nvidia and AMD to keep scaling.

Morgan Stanley said the new funds would support “one of the world’s largest data centers” and continued work on Grok. The latest Grok model, Grok 3, was launched in February. xAI has been integrating Grok with X (formerly Twitter), which Musk owns.

In March, xAI acquired X in a deal that pegged the social platform’s valuation at $33 billion and xAI’s at $80 billion. It’s unclear if the recent equity raise has shifted that number.

xAI didn’t respond to a request for comment.

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

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

The broader AI funding race in the U.S. is heating up fast. In March, OpenAI locked in a $40 billion round, pushing its valuation to $300 billion. Anthropic hit a $61.5 billion valuation and later secured a $2.5 billion revolving credit line.

Musk has repeatedly criticized OpenAI, a company he co-founded, for straying from its original nonprofit mission. In February, Musk and a group of investors made a $97.4 billion bid to take control of OpenAI. Sam Altman didn’t bite.

Musk has also sparked controversy with Grok’s output. Earlier this year, the chatbot made strange references to topics like “white genocide” in South Africa. Despite the backlash, Musk continues to position Grok as a challenger to what he sees as politically skewed AI tools.

Now, with $10 billion more in the bank, xAI looks ready to double down on that fight.

Founded in July 2023 by Elon Musk, xAI set out with a mission to explore the universe’s deepest mysteries. The xAI team includes top talent from companies like Google DeepMind, OpenAI, Microsoft Research, and Tesla—people who have driven advancements such as DeepMind’s AlphaCode and OpenAI’s GPT-3.5 and GPT-4. Musk appears to be positioning xAI as a formidable player in the AI space, aiming to compete with giants like OpenAI, Google, and Anthropic, each known for their flagship AI models.