Musk Seeks $12 Billion to Supercharge xAI’s AI Arms Race

TradingKey - According to The Wall Street Journal , Elon Musk’s artificial intelligence company xAI, having already secured $10 billion in equity and debt financing, is now seeking up to $12 billion in additional funding to fuel its rapid expansion. The capital would be raised through a special financing vehicle led by Valor Equity Partners, a long-time financial partner of Musk, and would be used to purchase large quantities of advanced NVIDIA GPUs. These chips would be deployed via lease arrangements to support xAI’s development of hyperscale data centers.

Facing fierce competition from rivals like OpenAI, Google, and Meta, xAI urgently needs capital to close the gap in both technological capabilities and computing resources. However, the company faces immense financial pressure: it is not yet profitable, generates minimal revenue, and is projected to burn through $13 billion in cash by 2025. To secure funding, xAI has pledged key assets as collateral — including the intellectual property behind its Grok AI model and its data center infrastructure. Its previously issued $5 billion in bonds carry a high interest rate of 12.5%.

Notably, instead of relying on cloud providers like AWS or Google Cloud, xAI has opted to build its own infrastructure — a strategy that results in extremely high capital expenditures. Its financing model is complex, relying on long-term GPU leases and substantial debt, which will create ongoing repayment obligations.

Lenders have imposed strict terms: some require repayment within three years, while others have set borrowing limits to manage risks associated with the rapid depreciation of AI chips and the pace of technological change.

In the event of a default, creditors could reclaim the GPU assets, lease the data centers to third parties, or potentially assert claims over AI models integrated into Musk’s other companies.

As the AI race intensifies, Musk is leveraging his entire business ecosystem to back xAI’s ambitions — with potential benefits extending across his portfolio, including autonomous driving technology at Tesla. While this all-in strategy could strain liquidity at his other ventures, there are currently no visible signs of financial stress. Investors should continue to monitor Tesla’s post-earnings performance for early warning signals.

It is important to note that these financing plans have not been confirmed by Musk himself. On July 11 (U.S. Eastern Time), Musk responded to the reports on his social media platform, stating: “The rumors are false. xAI is not currently seeking funding — we have plenty of capital.”