American investment bank Morgan Stanley is launching a $5 billion funding package for xAI, Elon Musk’s artificial intelligence startup. The deal includes both fixed-rate bonds and floating-rate loans, offering investors a choice between two yield structures. However, enthusiasm has started to cool — largely due to xAI’s $341 million first-quarter loss and increasing political tensions.

🔹 What Exactly Is Morgan Stanley Offering?

The offering, which began last week, includes:

🔹 A Term Loan B – with a floating rate priced at 97 cents on the dollar and yielding 700 basis points above SOFR.

🔹 An alternative package – offering fixed-rate bonds and loans with a 12% yield.

Sources say these terms may be adjusted depending on investor demand. Initial buzz saw commitments exceeding $3.5 billion, but interest has since slowed, prompting the bank to reach out to smaller lenders who had been excluded from earlier talks.

💸 Investors Wary: xAI’s Losses and Musk-Trump Rift Cast a Shadow

According to insiders, the offering currently matches its target size of $5 billion, but lacks the oversubscription banks typically hope for. A final investor list is expected by June 17.

Morgan Stanley is being cautious this time, clearly seeking to avoid a repeat of the 2022 Twitter takeover debacle, where the bank and others financed Musk’s acquisition of Twitter (now X) with $13 billion in debt. Following Fed rate hikes and turmoil in Musk’s restructuring of the platform, the banks ended up stuck with the debt on their books for over two years.

Now, the bank is opting for a “best-efforts” approach with no capital commitment or underwriting guarantee, shaping the deal around actual investor interest rather than a pre-committed structure.

📉 xAI Reports $341 Million Loss – Musk Still Sees a Breakthrough Ahead

At last week’s investor meeting, xAI leadership revealed a $341 million EBITDA loss for Q1 2025. Despite this, they expressed confidence that the company could reach profitability in the coming years.

Investors pledging at least $50 million were given access to internal financial data, including cash flow projections, revenue forecasts, and future profit estimates.

Despite the red numbers, xAI’s valuation has soared. Following its merger with Musk’s social network X, the company is now valued at $94 billion, up from $51 billion at the end of 2024. The new entity, XAI Holdings, was valued at $113 billion in March, with xAI accounting for $80 billion and X for $33 billion.

🔁 Quiet Merger and Secondary Share Sale in the Works

The merger was executed with minimal outside consultation, involving only a tight circle of Musk’s trusted advisors.

Roughly a week ago, xAI announced plans for a $300 million secondary share offering, giving employees the chance to sell shares to external investors. This not only creates liquidity but also reinforces the company’s latest valuation.

Sources close to the matter say this could pave the way for a larger capital raise through a new stock issuance.

⚠️ Political Risk: Musk vs. Trump

While analysts pour over balance sheets, another risk looms large — growing tension between Elon Musk and Donald Trump. Their recent public spat has raised doubts over potential federal contracts, adding a layer of political uncertainty to the investment.

One-Minute Summary:

🔹 Morgan Stanley launches a $5 billion bond and loan package for xAI.

🔹 Investor appetite dampened by $341 million quarterly loss and political risks.

🔹 xAI’s valuation jumps to $94 billion after merging with Musk’s social platform X.

🔹 The bank uses a cautious approach, avoiding overexposure like in the 2022 Twitter deal.

📊 What do you think? Is xAI the next tech revolution, or just another overhyped burn-out?



#ElonMusk , #XAI , #MorganStanley , #market , #WallStreet

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