The AI startup xAI, founded by Tesla CEO Elon Musk, is consuming capital at an alarming rate and urgently needs to raise funds from the market to sustain its development efforts.
xAI is actively planning a financing program.
xAI currently focuses on its self-developed generative AI chatbot 'Grok' as its core product, integrating it into the X platform and gradually expanding its consumer and enterprise application scenarios. According to reports from Bloomberg, xAI currently has monthly cash outflows reaching up to 1 billion USD, and if the current pace of expansion continues, the total cash consumption for the year 2025 could exceed 13 billion USD, raising market concerns about its capital operations and risk management. To address cash pressure, xAI is engaging with investors to plan a diversified financing program totaling 8.8 billion USD, which includes:
5 billion USD debt financing package.
4.3 billion USD equity raise.
300 million USD internal share sale.
The aforementioned funds will mainly be used to construct a next-generation super data center located in Memphis, Tennessee, USA. This facility is expected to be equipped with 100,000 Nvidia H100 GPUs to support the computational needs for training and deploying xAI's generative AI models.
Last year's valuation has exceeded 100 billion USD, but cash flow remains tight.
Although xAI completed a round of 6 billion USD funding last year, reaching a valuation of 50 billion USD, and acquired its own X social platform (formerly Twitter) through an all-stock transaction at the beginning of this year, pushing the valuation to as high as 113 billion USD, reports indicate that xAI still faces significant financial pressure.
According to financing documents obtained by Bloomberg, xAI's leveraged cash flow performance and financing conditions indicate that the capital chain has become tight, necessitating more external funding to support operations and expansion plans.
Data center site selection faces controversy.
In addition to funding pressures, xAI also faces potential legal challenges. The National Association for the Advancement of Colored People (NAACP) and local environmental organizations have expressed plans to sue over the Memphis data center, citing concerns that the construction could pose pollution risks to the local environment and community health. Related legal proceedings may further delay the project's progress.
The market remains optimistic about future potential.
Despite concerns over short-term financial conditions, investors remain confident in xAI's long-term profitability. Morgan Stanley estimates that xAI will achieve an annual EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of 13 billion USD by 2029, making it one of the AI companies with the greatest profit potential globally.
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