Musk's AI startup burning $1 billion a month, seeks $9.3 billion lifeline

To keep up with soaring costs, Elon Musk's xAI is now trying to raise $9.3 billion in both debt and equity, with over half expected to be used within three months

 

Elon Musk’s artificial intelligence startup is reportedly burning through $1 billion every month as the cost of developing its advanced models outpaces limited revenue, Bloomberg reported, citing people familiar with the company’s finances.

 

To bridge the gap, xAI is now looking to raise $9.3 billion in both debt and equity. The company plans to use more than half of this money within the next three months, having already spent most of the capital it raised earlier.

 

xAI raised $14 billion, but just $4 billion remains

 

Between its founding in 2023 and the start of its latest debt offering, xAI had raised $14 billion in equity. But by the end of March 2025, just $4 billion remained, according to investor materials. The company expects to spend an additional $13 billion during 2025, with fundraising efforts barely keeping up with expenditures.

 

 

Lagging behind OpenAI and Anthropic

 

xAI is struggling to scale its income compared to rivals like OpenAI and Anthropic. OpenAI is reportedly on track to generate $12.7 billion in revenue in 2025, while xAI projects just $500 million for the same period. However, it hopes to cross $2 billion in revenue by 2026, based on investor briefings.

 

xAI bets on its own infrastructure and Musk’s X

 

Despite the gap, xAI believes its long-term strategy offers advantages. Unlike peers that rent servers, xAI is buying much of its own infrastructure. It also benefits from integration with X (formerly Twitter), Musk’s social media platform, which provides access to vast amounts of real-time content for AI model training—minimising the need for external datasets.

 

These structural benefits underpin xAI’s projections of turning profitable by 2027.

 

Strong backing from major investors

 

Investor confidence remains high, aided by Musk’s influence. xAI’s valuation rose from $51 billion at the end of 2024 to $80 billion in Q1 2025. Key backers include Andreessen Horowitz, Sequoia Capital, and VY Capital.

 

New funding round and $5 billion loan on the table

 

xAI is close to finalising $4.3 billion in new equity funding and plans to raise another $6.4 billion in 2026. It is also working with Morgan Stanley to arrange a $5 billion debt facility, expected to support the development of AI-focused data centres.