Elon Musk’s AI startup xAI is raising $10B at $200B valuation amid Grok backlash

Elon Musk’s AI startup xAI is back in the spotlight with reports of a massive fundraising effort. According to CNBC, the company is seeking $10 billion from investors in a deal that would value it at $200 billion. If true, it would mark one of the biggest bets yet on an AI company—just months after Anthropic pulled in $13 billion at a $183 billion valuation and OpenAI hit a staggering $500 billion through a secondary sale.

The fundraising chatter comes only weeks after Musk raised $10 billion in debt and equity at a valuation closer to $150 billion. Last December, xAI closed a $6 billion round to fuel its ambitions. Musk, for his part, tried to shut down the latest headlines, calling the report “fake news” in a post on X and insisting “xAI is not raising any capital right now.”

“Elon Musk’s xAI is raising $10 billion from investors in a round that values the artificial intelligence startup at $200 billion,” CNBC reported, citing sources with direct knowledge of the situation.

xAI’s climb has been anything but smooth. Its Grok chatbot has been caught up in controversy after praising Adolf Hitler, making antisemitic remarks, and spouting unrelated claims about “white genocide” in South Africa. Those incidents drew sharp criticism and highlighted the risks of Musk’s push to catch rivals Anthropic and OpenAI, whose products are considered more capable and widely adopted.

The turbulence hasn’t stopped at product missteps. Last week, xAI laid off at least 500 employees from its data annotation team—the group tasked with training Grok—according to Business Insider. Workers were notified by email late Friday that their contracts were ending, with system access cut immediately. They’ll be paid through the end of their contracts or November 30.

Earlier this year, Musk announced that xAI would merge with X in an all-stock deal that valued the AI startup at $80 billion and the social media platform at $33 billion. Musk bought Twitter for $44 billion in 2022 before renaming it X. The combination was pitched as a way to tie AI directly into the social network’s future, though Musk has repeatedly said he does not support a merger between xAI and Tesla.

The money at stake now would give xAI firepower to chase Musk’s vision of building massive AI infrastructure. He has said he wants to purchase a million AI chips, largely Nvidia and AMD GPUs, to fill new data centers and support training large models. Part of that plan includes a supercomputer cluster being built in Memphis, Tennessee.

Musk’s personal financial stakes are also growing. Tesla’s board recently asked shareholders to approve a pay package for him that could be worth nearly $975 billion, an amount that underscores his influence across industries. For xAI, though, the question remains whether capital and ambition are enough to close the gap with rivals, or if Grok’s missteps—and the loss of hundreds of annotators—will keep haunting its climb.