Elon Musk’s artificial intelligence firm – xAI Holdings (created in March from the combination of X and xAI) – is reportedly in discussions to raise around $20 billion in a new funding round. According to a report by Bloomberg, the combined valuation of xAI and its merged operations would exceed $120 billion if the funding round is successful. In fact, this potential funding round would be the second-largest startup financing deal to date, following OpenAI’s recent $40 billion raise, which brought its valuation to $300 billion.
Also, as per the report, the final amount raised may surpass $20 billion, and the terms of the deal are still subject to change. Interestingly, this move follows xAI’s recent acquisition of the social media platform X (formerly known as Twitter) in a deal valued at $33 billion. Despite facing criticism (including former Twitter executive Bruce Daisley, who questioned the financial viability of xAI), this merger has received support from significant investors. This merger is aimed at enhancing xAI’s competitive edge in the AI sector by leveraging X’s extensive user base and real-time data.
Meanwhile, the anticipated $20 billion funding would not only strengthen xAI’s position in the competitive AI landscape but also provide Musk with the necessary capital to address the substantial debt burden from the $44 billion Twitter (now X) acquisition. Even last year (2024), Musk allocated a 25% stake in xAI to investors who supported the acquisition.
It is clear that xAI Holdings is currently facing significant financial challenges. X’s acquisition by Musk was partially financed through $13 billion in loans from major banks, including Morgan Stanley, Bank of America, and Barclays. These loans have imposed substantial interest obligations on X, with reports indicating that in March alone, the company paid around $200 million in servicing costs. In fact, reports suggest that the annual interest payments could exceed $1.3 billion.
Additionally, the financial burden on the company is also deepened by a significant decline in X’s advertising revenue, which has reportedly dropped by around 50% since Musk’s takeover.
But at the same time, xAI’s previous funding efforts have already attracted significant investment, including a $6 billion Series C round that valued the company at around $50 billion. xAI (founded by Musk in July 2023) is known for developing the popular (yet controversial) AI chatbot Grok, which has been integrated into the X platform.
This development comes at a time when Musk’s xAI recently joined the AI Infrastructure Partnership (AIP) – a consortium backed by Microsoft, BlackRock, and Abu Dhabi’s MGX – aiming to invest over $30 billion in AI infrastructure across the United States. In another related development, xAI is reportedly nearing a deal with Dell Technologies to purchase over $5 billion worth of AI servers equipped with Nvidia’s GB200 chips. These servers are expected to be delivered later this year and will play a crucial role in expanding xAI’s data center capacity to train AI models.
Content originally published on The Tech Media – Global technology news, latest gadget news and breaking tech news.
