Elon Musk’s AI startup xAI is in talks to finalise $4.3 billion in new equity funding and has plans to raise another $6.4 billion in capital for the next year, the company has told investors, according to a report by Bloomberg.
Additionally, Morgan Stanley is helping secure an additional $5 billion in debt, as previously reported, to finance the development of xAI’s data centres. Other companies are opting for project financing instead.
The company is working to raise enough funds to cover its significant expenses. Since its founding in 2023, it has raised $14 billion in equity, but only $4 billion remained at the start of the first quarter. People familiar with the matter told Bloomberg that the company expects to use nearly all of that in the second quarter.
Furthermore, the report indicated that xAI may receive a $650 million rebate from one of its suppliers, which will help the company reduce expenses.
XAI, which purchased X earlier this year, is believed to have a valuation of $80 billion by the conclusion of the first quarter, an increase from $51 billion at the close of 2024.
According to the media outlet, xAI is also losing $1 billion monthly as costs for advanced AI models exceed limited revenues. This rapid cash burn underscores the significant financial challenges in the AI industry, particularly for xAI, where revenue has been slow to generate.
The company plans to spend over half of it in the next three months, even before receiving the money.
xAI, which drives chatbot Grok, anticipates a cash burn of approximately $13 billion throughout 2025, as indicated in the firm’s levered cash flow information provided to investors. Consequently, its extensive fundraising initiatives are just managing to match its costs, as noted by the sources.
However, commenting on the cash burn, Musk replied to a post on his social media platform X, saying, “Bloomberg is talking nonsense.”
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