Elon Musk’s xAI Raises $10 Billion to Compete with OpenAI and Anthropic

Elon Musk’s AI startup xAI has raised $10 billion in a mix of debt and equity, according to a report by CNBC, marking a major move in its race to compete with OpenAI and other leading AI firms.

Debt and Equity Raise Backed by Global Investors

Morgan Stanley confirmed on Monday that xAI secured $5 billion through strategic equity investments and another $5 billion through secured notes and term loans. According to the bank, the debt offering was oversubscribed and included prominent global investors.

The funding will support xAI’s continued development of its AI platform Grok and investment in large-scale infrastructure. Morgan Stanley said “the proceeds will support xAI’s continued development of cutting-edge AI solutions, including one of the world’s largest data center and its flagship Grok platform.”

Powering Grok with Supercomputing Infrastructure

In May, Musk revealed that xAI had already installed 200,000 GPUs at its Colossus supercomputing facility in Memphis, Tennessee. The site serves as the core training hub for xAI’s artificial intelligence models. He also shared plans to expand to a one million GPU facility outside Memphis, relying heavily on chips from Nvidia and AMD.

The new capital is expected to accelerate this infrastructure expansion as xAI scales to compete with firms like OpenAI, Anthropic, and others in the fast-moving AI space.

Musk Positions Grok as a Rivals’ Alternative

xAI’s Grok chatbot continues to evolve, with the company releasing Grok 3 in February. In March, xAI acquired X, the social media platform formerly known as Twitter, in a deal that valued the site at $33 billion and xAI at $80 billion. Musk has since integrated the Grok chatbot into the platform to boost adoption. It’s unclear whether the latest equity round has changed that valuation.

Last year, xAI raised $6 billion at a $50 billion valuation, according to CNBC—highlighting the company’s sharp valuation growth. Morgan Stanley said the latest debt offering was “oversubscribed and included prominent global debt investors.”

Musk has positioned Grok as a “maximally truth-seeking” and “anti-woke” alternative to mainstream AI chatbots, which he has criticized for ideological bias. However, the system has faced controversy, including incidents where it produced inflammatory or unrelated responses to user prompts involving topics like “white genocide” in South Africa.

A Competitive Field of AI Fundraising

Other leading U.S. AI firms are also raising aggressively. In March, OpenAI closed a $40 billion financing round at a $300 billion valuation. Anthropic, backed by Amazon, recently raised funding that valued the Claude chatbot developer at $61.5 billion and secured a $2.5 billion credit line in May.

What This Means

xAI’s $10 billion funding round marks more than just a capital boost—it reflects Elon Musk’s strategy of building a vertically integrated AI ecosystem. By owning both the infrastructure and the distribution channel through X, xAI isn’t just developing a chatbot; it’s constructing a platform with built-in reach, data access, and brand control.

This approach contrasts with rivals like OpenAI and Anthropic, which rely more heavily on partnerships with cloud providers and third-party integrations. xAI’s path gives it tighter control—but also raises the stakes, especially as Musk continues to shape Grok’s tone and positioning in highly visible and sometimes controversial ways.

With escalating costs for chips, data centers, and model training, the competition among AI firms is increasingly defined by who can secure capital and scale infrastructure fast enough. xAI’s latest raise gives it a seat at the table—but staying there will depend on its ability to deliver safe, competitive, and scalable AI products in a crowded field.

The financing also reflects a broader trend: the AI arms race is no longer just about model quality—it’s about who can afford the infrastructure to power the next generation of artificial intelligence.

Editor’s Note: This article was created by Alicia Shapiro, CMO of AiNews.com, with writing, image, and idea-generation support from ChatGPT, an AI assistant. However, the final perspective and editorial choices are solely Alicia Shapiro’s. Special thanks to ChatGPT for assistance with research and editorial support in crafting this article.