Elon Musk’s AI company xAI has raised a total of $10 billion in fresh capital. The amount consists of $5 billion in loans and another $5 billion in strategic equity investments, Morgan Stanley announced on Monday.
With this substantial capital injection, the startup aims to further expand its infrastructure and accelerate the development of its Grok platform. According to Morgan Stanley, the debt financing consists of a mix of secured bonds and term loans. The issue was oversubscribed, meaning that investor demand exceeded the available supply. Major international players showed interest in the debt securities, despite earlier signs that investors were cautious. The loan requires collateral, something that is becoming increasingly common in the AI sector. Companies use graphics cards, for example, as collateral to obtain financing.
In addition to the current financing round, talks are reportedly underway about an additional $20 billion share issue. This could raise xAI’s valuation to $120 billion, with some investors even talking about a possible valuation of $200 billion.
Data center in Memphis
The capital raised will be used to further roll out xAI’s infrastructure plans. Last year, the company built a large-scale data center in Memphis to support its AI training. This is where the Colossus supercomputer runs , which already contained 100,000 GPUs when it was completed. In May, it was announced that this number has now doubled to 200,000.
xAI has announced plans to further scale this number with an additional 800,000 GPUs. To achieve this, a 1 million square foot site was purchased earlier this year near a power plant in Memphis, with an estimated value of $80 million. A new data center will be built here, with space for up to 350,000 GPUs.
Grok as a spearhead
The investment is xAI’s third billion-dollar round since early 2024. In November, the company raised $6 billion at a valuation of $50 billion. Following its merger with social media platform X (formerly Twitter) in March, that valuation rose to $80 billion. The impact of the new funding round on the company’s valuation is not yet known.
xAI is firmly committed to its own Grok platform, a series of AI models designed to compete with systems from OpenAI and Anthropic, among others. Grok will also be integrated into the X platform, which xAI acquired earlier this year for an amount that valued the site at $33 billion.
According to Morgan Stanley, the proceeds from the financing round will be used for the further development of Grok and the expansion of data center infrastructure. With its ambitious plans, xAI is positioning itself as a serious challenger in the increasingly intense AI arms race.