Musk's startup xAI, responsible for the AI chatbot Grok, is projected to consume approximately $13 billion in cash by 2025. (Image source: xAI official website)

According to Bloomberg, an unnamed investor has reported that Musk's AI startup xAI is negotiating to raise $4.3 billion through equity sales, having already secured $5 billion through loans from investors.

Founded less than two years ago, xAI is on track to burn through $14 billion. Since its establishment on July 12, 2023, xAI has raised $14 billion through multiple rounds of equity financing, mainly due to the high costs associated with developing and deploying advanced AI technologies, hardware, computing power, and top talent.

As of March 31, 2025, the company's balance sheet shows it only has $4 billion in cash left. The company has made a new equity offering to attract investors back to its funding, amidst Musk's public disputes with President Trump.

Insiders have revealed that the company has revised debt terms to alleviate investor concerns, making asset transfers more difficult and thus protecting creditors' collateral while limiting the amount of financing secured against guarantees from the company. Musk's startup is expected to burn around $13 billion by 2025.

xAI completed a $5 billion debt financing led by Morgan Stanley on Tuesday, although demand for these debt financing options has been lukewarm, with investor interest lower than normal; the total amount subscribed was about 1.5 times the debt amount, down from the typical subscription rate of 2.5 to 3 times for similar high-yield transactions. Additionally, xAI may receive $650 million in rebates from manufacturers, helping the company cut costs.

Due to the rapid cash burn rate, xAI has been forced to raise funds and is planning to raise an additional $4.3 billion through equity investment to support operations and product development, which explains why xAI is selling bonds while also seeking equity investors in a dual fundraising effort. Large-scale fundraising has become a standard characteristic of the competitive AI industry, where top firms are procuring expensive computer chips and infrastructure to train advanced AI models.

Despite the significant investment, xAI's valuation has risen to $80 billion, marking a 60% increase. Musk recently decided to merge xAI with social media company X, with the newly injected funds allocated for xAI's operations.