Fresh off acquiring X, as well as AI image generation system Hotshot, it seems that xAI is now moving to further solidify its financial footing, in order to take the next steps as a genuine player in the AI space.
According to a report from Bloomberg, Elon Musk’s AI project is in talks with investors on a new $20 billion funding round, which would value xAI at $120 billion.
As per Bloomberg:
“If completed, the prospective deal would be the second-largest startup funding round of all time, according to data provider PitchBook, trailing only OpenAI’s $40 billion financing earlier this year.”
Which is pretty amazing, considering the rate of development of Elon’s AI startup.
xAI developed its “Colossus” mega data center in record time, which immediately brought it into line, in compute terms, with OpenAI and other AI projects.
It still trails Meta, which has far more resources to power its expanding AI vision. But xAI, with its Grok chatbot, and other tools, is now big enough to be considered a legitimate contender in the AI shift.
And given the broader hype around AI tools, that’s provided a new opportunity to bring in more funding for Musk’s companies.
Thus far, xAI has raised over $12 billion to power its development, with Musk placing its value at around $80 billion at last update.
But another injection of capital would take that even higher, and with investors ever-keen to back Elon Musk’s vision, combined with potential for expanded opportunities as a result of his close ties to the Trump White House, it does seem like xAI will soon announce a big new stream of cash to help it build for the next stage.
So what is that next stage?
Well, it seems like this shouldn’t be an option, but Elon’s DOGE government reform group is currently looking to integrate AI-based solutions to improve bureaucratic efficiency.
Have a guess who’s going to be the frontrunner for that contract.
And if Musk can secure this, and other government-aligned systems for his AI start-up, that could secure its future, and make it the key player in U.S. AI reforms and integration.
Because government providers will then also need to utilize xAI tools, to ensure that their systems can communicate, and with this in mind, it’s not hard to see how xAI could become a major money-maker for Musk in the near future.
Which is also good news for X, which, as noted, was recently acquired by xAI.
X’s ad revenue is still way down on what it had been (even after an uptick after the election), and its debt load looked set to sink the company, if Musk and his team weren’t able to find an alternative funding option.
Which they did, by using Musk’s AI start-up as a vehicle to share funding with the struggling social platform. And now, with X data tied into xAI to fuel its outputs, any funding that xAI can raise will also be funneled to X as well, helping to reduce debt, as well as its reliance on ad revenue as a key income stream.
Essentially, if xAI does end up securing major contracts, X will be able to reduce its focus on ads.
Which was Elon’s plan all along.
Originally, Musk had hoped to make subscriptions the key earner for X, which would then reduce the platform’s reliance on ads, and thus, its need to adhere to standards set out by its ad partners.
It could now achieve the same result, in a different way, which could mean that Elon is eventually left with more freedom to set X’s moderation rules to whatever he likes.
Which doesn’t sound great, considering its broader potential for influence. But Musk and his teams are masters of market dynamics, while also being experts at sourcing government funding to prop-up Elon’s business empire.
So right now, it all feels a little artificial, it’s not a real, tangible product that xAI is offering that’s bringing in enough money to justify a $120 billion valuation.
Not yet at least, but when that government AI contract gets announced, after Elon leaves DOGE, and severs all legally binding ties with the group, you can bet that xAI’s valuation will be justified, helping to establish the foundations of Musk’s social/AI arm.
