Musk Allies to Raise Up to $12 Billion for xAI Chips as Startup Burns Through Cash

Elon Musk is pulling every financial lever he can to keep pace in the artificial intelligence arms race.

- Berber Jin, Peter Rudegeair & Matt Wirz

Just weeks after Musk's xAI raised $10 billion through sales of stock and debt, the startup is working with a trusted financier to secure up to $12 billion more for its ambitious expansion plans, people familiar with the situation said.

Valor Equity Partners, an investment firm whose founder, Antonio Gracias, has close ties to Musk, is in talks with lenders to raise the capital. The money would be used to buy a massive supply of advanced Nvidia chips that would be leased to xAI for a new jumbo-sized data center meant to help train and power the AI chatbot Grok.

Musk needs all the financial firepower he can get to stay competitive in a wild and costly AI battle with well-funded rivals like Google, Microsoft, and Meta. Grok hasn't gained nearly as much traction as OpenAI's ChatGPT and took a reputational hit earlier this month when it posted racist and controversial comments to users on the social-media platform X. The startup apologized for what it called "horrific behavior."

With xAI's balance sheet already stretched, Musk is getting creative to keep the money flowing. SpaceX recently invested $2 billion into xAI, effectively moving cash from the coffers of one Musk company to fund another. For the $5 billion in debt xAI raised in June, the company pledged its most prized asset—the intellectual property behind Grok—as part of the collateral, people familiar with the situation said.