Burning 1 billion every month, Musk's xAI raises another 10 billion dollars in "stocks + bonds".

xAI has completed a $10 billion financing round, including $5 billion in debt and $5 billion in equity investment. The debt financing includes bonds and loans with a 12.5% yield. This funding will be used to support xAI in continuing to develop cutting-edge AI solutions, including the Grok platform.

Written by: Long Yue

Source: Wall Street Journal

As tech giants compete to bet on the future of AI, Musk's xAI finds itself in a financial paradox: it successfully raised a massive $10 billion in funding, but behind it is a "burn rate" black hole reaching as high as $1 billion per month, far outpacing competitors like OpenAI.

On July 1st, Morgan Stanley announced on the X platform that Elon Musk's artificial intelligence company xAI has completed a new round of financing totaling $10 billion, which includes $5 billion in debt financing and $5 billion in equity investment. This "equity + debt" combination financing method aims to reduce overall capital costs and significantly expand the available capital pool.

The investment bank acted as an advisor for xAI's $5 billion debt financing, stating that the debt financing was oversubscribed and attracted participation from well-known global debt investors. Morgan Stanley stated that the proceeds from the financing will be used to support xAI's ongoing development of cutting-edge AI solutions, including the construction of one of the world's largest data centers and the development of its flagship product, the Grok platform. Grok is positioned as a competitor to ChatGPT and is the core product for xAI's entry into the generative AI market.

The Information cited informed sources revealing that the debt financing specifically includes: bonds worth $3 billion with a yield of 12.5%, a fixed-rate term loan of $1 billion with an interest rate of 12.5%, and a term loan of $1 billion with a benchmark interest rate plus 7.25 percentage points, the latter issued at a discount price of 96 cents.

This is already xAI's second large-scale financing in a short period of time. According to previous reports, the company just completed a $6 billion equity financing in December last year, with investors including well-known institutions such as Andreessen Horowitz, BlackRock, Lightspeed Venture Partners, and MGX.

Between two rounds of financing, xAI also acquired Elon Musk's social media company X through an all-stock transaction, with the post-merger company valuation reaching $113 billion. The intensive financing and acquisition activities reflect xAI's huge capital demand in AI infrastructure construction and product development.

xAI burns $1 billion monthly, far exceeding revenue

Despite securing billions in financing, xAI's financial troubles remain prominent.

Previously, Wall Street Insights mentioned that xAI's monthly cash burn reaches as high as 1 billion dollars, primarily used for building advanced AI models and infrastructure, while its revenue remains limited. xAI expects its revenue to be only 500 million dollars this year. In contrast, its competitor OpenAI expects to generate 12.7 billion dollars in revenue in 2024.

However, xAI's financing pace can barely keep up with its spending—after raising $14 billion in equity financing in 2023, it is expected to have only $4 billion left by the first quarter of this year, and to burn through it by the second quarter. Sources indicate that xAI plans to spend more than half of that amount within the next three months. The company expects to consume about $13 billion in total funding for the year 2025 and plans to raise another $6.4 billion in 2026.

At the same time, xAI is expected to achieve profitability by 2027. According to previous media reports, OpenAI aims to achieve positive cash flow by 2029.

These growth forecasts, coupled with Musk's star power and political influence, make xAI still attractive in the financing market. Even though Musk's relationship with President Trump has recently soured, investors remain drawn in. The company disclosed to investors that by the end of the first quarter of 2025, xAI's valuation has risen from $51 billion at the end of 2024 to $80 billion. Investors include Andreessen Horowitz, Sequoia Capital, VY Capital, and others.