Elon Musk’s AI firm, xAI Corp., is pursuing a $5 billion debt package. Investment bank Morgan Stanley reportedly manages the offering, launched June 2, 2025. This ambitious fundraising is part of a larger $5.3 billion effort, which includes a $300 million stock sale. The venture has already seen strong investor interest. Demand for the debt reportedly exceeds $3.5 billion. The capital is intended for general corporate purposes, widely expected to fuel the expansion of xAI’s “Colossus” AI supercomputer project, detailed on its project page.
The entity seeking this substantial financing is XAI Holdings, the merged company combining xAI and the social media platform X. A Fortune report detailed the debt package as including a term loan B, a fixed-rate term loan, and senior secured notes. This information comes from a person familiar with the matter not authorized to speak publicly. Commitments for this debt are due by June 17. This move underscores Musk’s renewed focus on his tech ventures following his departure from a government advisory role. It also highlights the massive capital required to compete in the AI sector.
Aggressive Fundraising Amidst AI Boom
Early pricing discussions for xAI’s debt suggest potentially high yields for investors, with Bloomberg indicating rates around seven percentage points above benchmarks for floating-rate components and yields near 12% for senior secured notes. This $5 billion debt initiative is the latest in a series of financial activities for Musk’s companies.
It follows xAI’s $300 million employee stock sale, which reportedly affirmed a $113 billion valuation for the combined XAI Holdings. Separately, Musk’s neurotechnology firm, Neuralink Corp., recently secured $650 million. XAI Holdings was reportedly exploring an even larger funding round of roughly $20 billion, pointing to lower as expected interest from investors. But spreading the higher number of $20 billion earlier could also have been a strategic move.
The X Factor: Merging AI Ambitions with Social Media’s Challenges
The strategic merger of xAI and X into XAI Holdings occurred in March, valuing xAI at $80 billion and X at $33 billion. The merger was partly seen as a move to support the X platform, which has faced financial headwinds, including significant debt and advertiser concerns following content policy shifts.
The consolidation, which ommitted traditional Wall Street oversight procedures, allows X to leverage xAI’s growing valuation. Musk has emphasized that the futures of X and xAI are “intertwined”, believing the combination “will unlock immense potential”.
Morgan Stanley’s involvement is also noteworthy. The bank has extensive history with Musk, including advising on the Twitter acquisition and later profiting from reselling the associated debt, where the X/xAI synergy was reportedly marketed to bond investors.
Grok’s Growth And Lingering Headwinds
Launched in 2023 to compete with AI leaders like OpenAI, xAI rapidly introduced its Grok chatbot and began developing its “Colossus” supercomputer cluster. Musk recently affirmed his new priorities, stating he is “super focused on X/xAI and Tesla”, describing them as “critical technologies”, after stepping back from government work due to what he termed a “blowback.”
To improve its offerings, xAI has introduced Grok features like a “Memory” function and a collaborative “Grok Studio”. Key partnerships include Microsoft adding Grok 3 to its Azure AI Foundry in May 2025, and a significant deal with Telegram for Grok integration, which Telegram founder Pavel Durov said would give users “access to the best AI technology on the market.”. However, xAI and X face ongoing challenges, including EU regulatory scrutiny of X, a trademark dispute over the “Grok” name, controversies regarding Grok’s outputs, and past operational issues like an API key leak in early May 2025.
Last Updated on June 17, 2025 5:16 pm CEST
