Elon Musk’s xAI nears $9.3 billion funding deal despite Trump feud

Founded in 2023, xAI has positioned itself as an anti-establishment AI player.

Elon Musk’s artificial intelligence startup xAI is closing in on a $9.3 billion capital raise despite recent tensions between Musk and President Donald Trump that temporarily clouded investor sentiment. The deal includes $5 billion in debt and $4.3 billion in equity, providing a critical infusion of capital as the company scales its infrastructure to take on industry leaders like OpenAI and Google, the Financial Times reported.

According to people briefed on the matter, investors have already placed orders exceeding $5 billion for a bond and loan offering being managed by Morgan Stanley. The appetite has given bankers confidence to finalize the debt portion of the deal, while the equity raise is proceeding in parallel.

Founded in 2023, xAI has positioned itself as an anti-establishment AI player. Its chatbot, Grok, launched as a provocative alternative to ChatGPT and Gemini, markets itself as committed to “truth-seeking” over political correctness. In March, xAI was merged with Musk’s social media platform X in a move that valued the combined group at $113 billion.

Trump tensions briefly spook investors

The fundraising effort hit a bump earlier this month amid a public feud between Musk and Trump. Once described by Musk as his “first buddy,” Trump and Musk exchanged barbs online, unsettling some investors who had seen Musk’s proximity to the White House as a key strategic advantage.

Musk had previously emphasized his strong ties to President Trump while courting investors, suggesting that his political connections could provide regulatory and business leverage against AI rivals. The unravelling of that relationship caused several potential backers to pull back, sources told the Financial Times.

Still, major investors including TPG Angelo Gordon are stepping in. The firm has committed $1 billion to anchor the debt offering, which will include a mix of fixed- and floating-rate bonds, reportedly priced to yield around 12 percent. Final commitments are due Tuesday, with pricing expected later in the week.

A high-burn race for dominance

xAI, like its competitors, is burning through cash as it rushes to build out the data centres needed to support large language models. The company told investors it lost $341 million before interest, taxes, depreciation, and amortization (EBITDA) in the first quarter of 2025.

Despite these losses, xAI is projecting bold future performance: it expects to achieve EBITDA of more than $13 billion by 2029. That outlook pales in scale to OpenAI’s forecast, which projects $125 billion in revenue by the same year, though OpenAI, too, anticipates remaining unprofitable in the near term.

A secondary share offering for xAI employees is also underway, which may serve to validate the $113 billion valuation Musk set in March. While xAI declined to comment on the funding round, the company appears to be betting heavily that its maverick brand, Musk’s political access, and massive capital backing will position it as a dominant force in the AI race.