SpaceX to Invest $2 Billion in Elon Musk’s xAI as AI Rivalry with OpenAI Intensifies

Elon Musk just made his next big move in the AI race—and he didn’t have to look far for the money. SpaceX is pumping $2 billion into Musk’s AI startup xAI as part of a massive $5 billion equity round first reported by The Wall Street Journal. It’s a bold play that ties two of Musk’s most high-profile ventures even closer together—and signals how serious he is about building a rival to OpenAI.

SpaceX, which had more than $3 billion in cash on hand, isn’t known for investing outside its own orbit. So this isn’t just another business transaction. It’s one of the largest outside bets SpaceX has ever made, showing how Musk is once again leveraging one part of his empire to prop up another. And with more SpaceX–xAI collaborations likely ahead, this $2 billion check could be just the beginning.

“Elon Musk’s SpaceX has agreed to invest $2 billion in his artificial-intelligence company xAI, investors close to the companies said, nearly half of the Grok chatbot maker’s recent equity raise,” The Wall Street Journal reported.

The report lands just four months after xAI acquired X Corp (formerly Twitter) in a $33 billion all-stock deal that pushed the merged company’s valuation to $113 billion.

A Deepening AI Alliance

The deal, part of a broader $5 billion raise coordinated by Morgan Stanley, also includes another $5 billion in debt financing. Musk launched xAI in 2023 to chase artificial general intelligence, and the company has been moving fast. Its flagship chatbot, Grok—described by Musk as “the smartest AI in the world”—is already integrated into SpaceX’s Starlink support system, with possible future roles inside Tesla’s Optimus humanoid robots.

That’s no coincidence. Musk has been aligning xAI with his other ventures since day one. Earlier this year, he merged the company with X, the platform formerly known as Twitter. The move gave xAI access to a massive stream of real-time data—and a built-in user base to test and train Grok. Since then, xAI’s valuation has jumped from $40 billion in late 2024 to $113 billion.

Musk’s Business Playbook

This kind of resource shuffling across Musk’s companies isn’t new. He borrowed $20 million from SpaceX to help Tesla years ago, and in 2022, he tapped the company for a $1 billion loan to help fund the $44 billion Twitter buyout—both since repaid. Now he’s using SpaceX once again, this time to fuel his vision for AI.

But it’s a risky balancing act. SpaceX is still deep in R&D for its next-gen Starship rocket, which has seen a string of delays and test failures. The company’s cash reserves offer some breathing room, but there’s pressure to deliver results both in orbit and on the balance sheet.

Grok’s Promise—and Its Problems

Grok has been hailed by some benchmarking services, like Artificial Analysis, for outperforming other popular AI models. But it hasn’t been without controversy. One incident involving antisemitic output triggered backlash and an apology from xAI, which blamed it on an unauthorized code update.

Despite the hiccups, Musk is doubling down. He sees Grok not just as a chatbot, but as a core piece of his broader automation push—one that could reshape customer support, robotics, and software across his companies.

Will Tesla Join In?

After news of the SpaceX deal broke, a user on X asked Musk if Tesla might also invest in xAI. His reply: “It would be great, but subject to board and shareholder approval.” That response didn’t confirm anything, but it leaves the door open. And it fits Musk’s playbook: get one company onboard, then bring the rest along for the ride.

The Bigger Picture

This investment comes at a time when the AI arms race is heating up. OpenAI recently closed a $6.6 billion round at a $157 billion valuation. Musk helped start that company before leaving in 2018. Now, he’s trying to outbuild it—faster, cheaper, and with the help of every company he runs.

xAI is already spending heavily on infrastructure, including a supercomputer site in Memphis that’s expected to support its next phase of model training. With SpaceX now officially in its corner, the company has the fuel it needs to scale.

Bottom line: Musk is turning xAI into more than just a side project. With SpaceX backing it financially and Grok spreading across his other companies, xAI is now a central piece of Musk’s tech empire—and a serious challenger in the AI race.