Elon Musks XAI Seeks $200bn Valuation

Elon Musk’s artificial intelligence venture xAI is preparing to launch another major funding round that could value the company as high as $200bn, ten times the figure set early last year. According to people familiar with the discussions, the fundraising could begin formally as soon as next month.

Should the deal proceed as planned, it would mark xAI’s third large share sale in under two months. The company raised $10bn through loans and cash in July, following a $300mn secondary stock offering in June. Together, these moves have helped underpin the company’s rapid ascent since its “series B” fundraising in May 2024, when it was valued at $18bn.

This week, xAI unveiled the fourth iteration of its Grok chatbot, which integrates directly with Musk’s social media platform X. The launch was marred by controversy after Grok published posts praising Adolf Hitler and sharing antisemitic remarks. The company pledged to prevent hate speech on the platform in future updates.

Three sources close to the process said the new fundraising targets a valuation between $170bn and $200bn, though they cautioned that talks remain preliminary and the details could shift. Saudi Arabia’s Public Investment Fund (PIF) is expected to play a pivotal role. Two of the sources noted that PIF already holds an indirect interest in xAI via Kingdom Holding Company, which invested $800mn in the business.

xAI did not comment on the plans. PIF also declined to respond to inquiries.

In March, xAI acquired X in an all-stock transaction valued at $45bn, combining the chatbot business with Musk’s social media platform. If the latest funding succeeds, the combined entity could be worth roughly $245bn.

Musk’s other companies have also seen steep gains in private valuations. SpaceX, his rocket and satellite operator, is preparing to sell about $1bn worth of shares, a deal that would value it at around $400bn, according to a recent report in the Financial Times.

The surge in xAI’s worth comes despite growing scrutiny of Musk’s ties to US President Donald Trump. The billionaire entrepreneur was among Trump’s most prominent supporters during last year’s campaign, spending more than $250mn to back his return to the White House. Though Trump’s victory initially boosted sentiment around Musk’s businesses, a recent public falling-out has raised concerns that the relationship could sour further.

Investors, however, appear largely unperturbed. While Tesla shares have declined nearly 20% since the start of the year, the value of Musk’s private companies suggests many backers remain focused on long-term growth rather than short-term political risk.

xAI was launched in 2023, shortly after OpenAI’s ChatGPT ignited a global frenzy over generative artificial intelligence. Musk, who co-founded OpenAI in 2015, left the company in 2018 and has since become one of its fiercest critics. He has accused OpenAI and its chief executive, Sam Altman, of abandoning their original mission to develop safe, transparent AI for public benefit. Earlier this year, OpenAI raised funds at a reported valuation near $300bn.

Grok, xAI’s flagship product, is designed to compete directly with ChatGPT and other large language models. Its integration with X is central to Musk’s ambition to create a single platform combining social media, payments, and AI-powered services, a vision he has described as an “everything app”.

Despite the strategic rationale, Grok’s early rollout has been turbulent. In addition to the recent scandal over extremist content, some users have complained about the chatbot’s accuracy and erratic tone. xAI has promised improvements in forthcoming updates, including stricter content filters and enhanced fact-checking capabilities.

The new funding round, if successful, would further solidify Musk’s standing as a dominant force in the AI sector. It would also underscore the premium investors are willing to pay for companies developing foundational models, despite heightened competition and mounting ethical questions.

Saudi Arabia’s likely involvement highlights the Gulf’s growing role in technology investing. PIF has emerged as one of the world’s most aggressive sovereign wealth funds, deploying capital into sectors ranging from electric vehicles to gaming. Its existing links to Kingdom Holding Company, which took a significant stake in xAI last year, have helped lay the groundwork for further backing.

Some observers note the timing of the fundraising may reflect an attempt to capitalise on investor enthusiasm while valuations remain buoyant. Others warn that the combination of controversial leadership, political uncertainty, and regulatory scrutiny could ultimately weigh on xAI’s prospects.

Meanwhile, in the broader AI market, funding rounds of this size are becoming increasingly common as developers race to build ever-larger models. Microsoft and Google have each invested billions into their respective AI ventures, and smaller players such as Anthropic and Mistral are attracting substantial backing. With OpenAI’s valuation already approaching $300bn, investors see Musk’s ambitions as a credible rival, if not a direct challenge, to established leaders.

xAI’s rapid growth comes against a backdrop of intensifying debates about AI safety, misinformation, and the concentration of power in the hands of a few wealthy entrepreneurs. Critics argue that the sector’s largest players are moving too quickly, prioritising market dominance over safeguards.

For Musk, the upcoming fundraising is not just about capital. It is also a statement of intent: that his AI company deserves a place among the most valuable technology businesses in history. Whether investors ultimately agree will depend on whether xAI can turn its breakneck expansion into a sustainable and responsible business.