Musk-Trump Feud: Will Politics Derail XAI's $5 Billion Debt Deal?

Elon Musk's Artificial Intelligence startup xAI Corp is on track to secure a $5 billion debt raise, led by Morgan Stanley, despite lukewarm investor demand.

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The deal, which includes a floating-rate term loan, fixed-rate loan, and secured bonds, has garnered modest interest, with investors submitting orders for roughly 1.5 times the amount of debt available. This development comes amid a public spat between Musk and US President Donald Trump, which has seemingly impacted investor enthusiasm. xAI's funding efforts also include talks to raise $20 billion in equity, valuing the company at over $120 billion.

Strong Start, Momentum Slows

The deal started strong. Early last week, Morgan Stanley had already received over $3.5 billion in investor orders. That suggested the offering could be oversubscribed, which is common for Musk-backed ventures. However, by June 16, 2025, interest had only reached around $5 billion. To keep momentum, the bank started contacting smaller lenders. These lenders were not part of the initial invitation.