Money-burning continues! Musk's xAI plans to raise $15 billion, with a potential valuation as high as $230 billion.

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Elon Musk’s AI startup xAI is currently in advanced negotiations for a new round of large-scale financing, aiming to raise massive ammunition for the costly AI infrastructure race.

According to media reports citing informed sources, xAI is in-depth negotiations for a new round of financing as high as $15 billion, which could push its valuation to $230 billion. Musk’s wealth manager Jared Birchall is reported to have disclosed relevant financing terms to investors on Tuesday evening.

If successful, the $230 billion valuation would represent a significant leap from the $113 billion valuation disclosed after xAI acquired Musk’s social media site X in March of this year. However, there are conflicting signals in the market regarding the exact details of this fundraising. After CNBC earlier reported xAI’s fundraising plan, Musk responded to a related post on his social platform X with a single word: “false.”

It is currently unclear whether the new valuation presented to investors by Jared Birchall is pre-money or post-money; neither Jared Birchall nor xAI spokespeople have yet responded.

Cash Burn Continues, Ongoing Fundraising

xAI’s fundraising pace has been accelerating. According to previous media reports, in June of this year, xAI raised $5 billion in equity and $5 billion in debt funding to build the Colossus data center in Memphis, Tennessee. As part of that round, Musk’s rocket company SpaceX invested $2 billion in xAI.

Currently, major AI startups are racing against time to build computational barriers through massive financing. This new round of funding sought by xAI is aimed at maintaining its position in competition with OpenAI and further expanding the capabilities of its chatbot Grok to compete with ChatGPT.

As CEO of Tesla, Musk has publicly supported the idea of Tesla investing in xAI. At a recent shareholders’ meeting, reactions to a proposal requiring the board to make such an investment were mixed and its approval depends on the decision of the board.

However, Tesla’s board has been cautious on the matter. Before the meeting, Tesla chair Robyn Denholm told the media that she questioned the logic of such an investment and noted that the board had not yet conducted the due diligence required to proceed.

Notably, the startup has recently undergone a series of high-level personnel changes, including the resignation of X’s CEO Linda Yaccarino and both the CFOs of X and xAI. This has raised some external concerns about the company’s operational stability.

This round of fundraising talks reflects the general capital predicament facing the AI industry. Like many of its peers, xAI is rapidly burning cash, due to the urgent need to build infrastructure to train and enhance its flagship model. This intense capital demand forces companies into an almost constant state of fundraising to lay the foundation for what could be trillions of dollars in industry spending over the coming years.

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