Elon Musk‘s xAI has successfully secured a massive $10 billion in fresh debt and equity. This move is a bid to expand AI infrastructure through data centers, amidst intensifying industry competition.
What Happened: Musk’s xAI has completed a $5 billion debt raise alongside a separate $5 billion strategic equity investment, reported Reuters.
Morgan Stanley (NYSE:MS) said, in a post on X, that the debt raise includes financing of secured notes and term loans. The bank said the deal was oversubscribed and attracted prominent global debt investors. The equity investment is aimed at supporting xAI’s continued development of AI solutions, a data center, and its flagship Grok platform, the bank stated.
The company is also in talks to raise about $20 billion in equity, which would value the company at more than $120 billion, with some investors placing valuations as high as $200 billion.
Why It Matters: This recent development comes just weeks after reports emerged that xAI was rapidly exhausting its financial reserves, with estimates suggesting a staggering monthly expenditure of approximately $1 billion. This underscores the extraordinary capital demands of developing sophisticated AI systems in today’s fiercely competitive landscape, raising crucial questions for investors regarding the long-term viability of AI startups operating outside the umbrella of tech giants with deep pockets.
According to an earlier report, xAI had also been in talks to raise $4.3 billion through an equity investment on top of its $5 billion debt funding plans. This move, coupled with the recent debt and equity raise, signifies xAI’s aggressive pursuit of capital to stay ahead in the AI arms race.
Meanwhile, the AI industry has been witnessing significant shifts, with major players like Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT) making strategic moves to advance their AI capabilities. This latest development from xAI is expected to further intensify the competition in the industry.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
