Elon Musk's xAI burns $ 1 billion a month and is rapidly increasing its capital raising

Elon Musk's artificial intelligence startup xAI spends about $ 1 billion a month, as the cost of developing advanced AI models significantly exceeds the company's current revenue. These data were provided by sources familiar with the startup's financial performance. A representative of xAI declined to comment on this information.

xAI, which is responsible for developing the Grok chatbot, plans to spend about $ 13 billion in 2025, as reflected in its leveraged cash flow data. To cover the growing costs, the company is in talks to raise $ 9.3 billion in debt and equity. According to sources, a significant part of these funds will be spent in the next three months from the date of receipt.

xAI's expenses are related to the need to create a large — scale infrastructure-from data centers to the purchase of specialized chips for training AI models. According to the Carlyle Group, by 2030, the development of AI infrastructure globally will require more than $ 1.8 trillion. CreditSights senior analyst Jordan Chalfin notes that AI developers are looking to increase borrowing quickly to provide a technological advantage in a highly competitive environment.

Despite its ambitious investments, xAI's revenue lags behind that of its biggest competitors. The company predicts revenue of about $ 500 million in 2025, rising to more than $ 2 billion in 2026. By comparison, OpenAI expects revenue of $ 12.7 billion this year.

The xAI management team relies on the long-term benefits associated with controlling its own infrastructure. The company pays for a significant portion of servers and chips directly, unlike a number of competitors who prefer to rent. In addition, the merger with the X social network allowed xAI to gain access to unique data sets for training AI models without the additional cost of buying data.

According to sources, xAI's valuation reached $ 80 billion by the end of the first quarter of 2025, an increase from $ 51 billion at the end of 2024. The company's investors include Andreessen Horowitz, Sequoia Capital, and VY Capital. Since its founding in 2023, xAI has raised $ 14 billion in equity, of which about $ 4 billion remained at the start of the year, and most of that amount has already been spent in the second quarter.

The company is finalizing $ 4.3 billion in new equity financing and plans to raise an additional $ 6.4 billion in 2026. At the same time, work is underway with Morgan Stanley to raise $ 5 billion in debt financing, which should support the development of its own xAI data center. The company also expects a $ 650 million discount from one of its equipment suppliers.

Some investors expressed caution about the initial terms of the debt offering. In response, xAI provided more detailed financial information and changed the terms of the transaction to increase the attractiveness of the offer. The debt sale continues under the management of Morgan Stanley.