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Elon Musk’s artificial intelligence company xAI is nearing a $9.3bn debt and equity deal, as investors looked past the billionaire’s spat with President Donald Trump that had complicated the capital raising efforts.
Investors have placed orders of more than $5bn in a bond and loan offering, giving the company’s bankers at Morgan Stanley confidence that they can finalise the financing round, according to people briefed on the matter.
xAI has told investors it also expects to complete a $4.3bn equity raise alongside the new debt package, giving it added firepower to build data centres as it looks to compete with rivals including OpenAI.
The company, founded in 2023, is competing with OpenAI, Anthropic, Google and others to develop and commercialise increasingly sophisticated AI tools. Musk’s company launched its own chatbot, Grok, as an irreverent alternative to ChatGPT and Google’s Gemini, claiming it would seek the truth rather than a politically correct narrative.
Musk combined xAI with his social media company X in March, in a deal that valued the combined entity at $113bn. The group recently launched a secondary offering, in which staff can sell their shares to investors, which would serve to validate the pricetag set by Musk in March.
The new fundraising was caught in the crossfire between Musk and Trump earlier this month when the two men lashed out at each other on social media. Musk has since said he regrets some of his posts about Trump.
The close ties between the two men, with Musk referring to himself as the president’s “first buddy”, had been seen as a boon to investors who were doing due diligence on xAI.
Musk had touted his close relationship with the White House in his pitch to investors, claiming the links could help him edge out rivals including OpenAI and Anthropic, according to two people familiar with the matter.
The unravelling of Musk’s relationship with Trump, in turn, raised new questions for investors and damped the enthusiasm of some, with several telling the Financial Times they decided against participating in the deal.
Nonetheless, several big money managers saw value in the $5bn debt package, with the bonds expected to be priced with a yield of about 12 per cent. The financing is expected to be split between fixed- and floating-rate loans and a bond. Investment group TPG Angelo Gordon agreed to anchor the deal, committing to invest $1bn in the debt, one person noted.
Commitments are due on Tuesday and it is expected to price later this week.
xAI did not respond to a request for comment. Morgan Stanley and TPG declined to comment.
The borrowing package and equity raise will give the firm the capital it needs to construct new data centres as it looks to compete with rivals. xAI and its competitors are burning through money as they look to equip data centres with chips that power their large language models.
xAI told investors that it lost $341mn before interest, taxes, depreciation and amortisation in the first quarter, according to a person familiar with the matter. But the company set lofty projections for its future, forecasting ebitda of more than $13bn in 2029.
OpenAI, by comparison, has forecast revenues of $125bn in 2029, though the company still expects to be lossmaking until then.
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