Elon Musk's xAI raises $10 billion in debt and equity as it steps up challenge to OpenAI

XAI, the artificial quality startup tally by Elon Musk, raised a combined $10 cardinal successful indebtedness and equity, Morgan Stanley said.

Half of that sum was clinched done secured notes and word loans, portion a abstracted $5 cardinal was secured done strategical equity investment, the slope said connected Monday.

The backing gives xAI much firepower to physique retired infrastructure and make its Grok AI chatbot arsenic it looks to vie with bitter rival OpenAI, arsenic good arsenic with a swathe of different players including Amazon-backed Anthropic.

In May, Musk told CNBC that xAI has already installed 200,000 graphics processing units (GPUs) astatine its Colossus installation successful Memphis, Tennessee. Colossus is xAI's supercomputer that trains the firm's AI. Musk astatine the clip said that his institution volition proceed buying chips from semiconductor giants Nvidia and AMD and that xAI is readying a 1-million-GPU installation extracurricular of Memphis.

Addressing the latest funds raised by the company, Morgan Stanley that "the proceeds volition enactment xAI's continued improvement of cutting-edge AI solutions, including 1 of the world's largest information halfway and its flagship Grok platform."

xAI continues to merchandise updates to Grok and unveiled the Grok 3 AI model successful February. Musk has sought to boost the usage of Grok by integrating the AI exemplary with the X societal media platform, formerly known arsenic Twitter. In March, xAI acquired X successful a woody that valued the tract astatine $33 cardinal and the AI steadfast astatine $80 billion. It's unclear if the caller equity rise has changed that valuation.

xAI was not instantly disposable for comment.

Last year, xAI raised $6 cardinal astatine a valuation of $50 billion, CNBC reported.

Morgan Stanley said the latest indebtedness offering was "oversubscribed and included salient planetary indebtedness investors."

Competition among American AI startups is intensifying, with companies raising immense amounts of backing to bargain chips and physique infrastructure.

OpenAI successful March closed a $40 cardinal financing round that valued the ChatGPT developer astatine $300 billion. Its large investors see Microsoft and Japan's SoftBank.

Anthropic, the developer of the Claude chatbot, closed a backing circular successful March that valued the steadfast astatine $61.5 billion. The institution past received a five-year $2.5 cardinal revolving recognition line successful May.

Musk has called Grok a "maximally truth-seeking" AI that is besides "anti-woke," successful a bid to acceptable it isolated from its rivals. But this has not travel without its just stock of controversy. Earlier this year, Grok responded to idiosyncratic queries with unrelated comments astir the controversial taxable of "white genocide" and South Africa.

Musk has besides clashed with chap AI leaders, including OpenAI's Sam Altman. Most famously, Musk claimed that OpenAI, which helium co-founded, has deviated from its archetypal ngo of processing AI to payment humanity arsenic a nonprofit and is alternatively focused connected commercialized success. In February, Musk alongside a radical of investors, enactment successful a bid of $97.4 cardinal to bargain power of OpenAI. Altman swiftly rejected the offer.

— CNBC's Lora Kolodny and Jonathan Vanian contributed to this report.