Elon Musk-backed AI company xAI has raised $5bn in debt and an additional $5bn through an equity investment.  

In a statement on X, Morgan Stanley announced that the debt comprises secured notes and term loans, and the deal was oversubscribed by “prominent” global debt investors.  

The blend of debt and equity financing lowers xAI’s overall capital costs and significantly broadens the funding sources accessible to the company, the bank explained.  

xAI will use the funds to support its development of advanced AI solutions, including the establishment of one of the world’s largest data centres and the enhancement of its flagship Grok platform.  

XAI Holdings, the conglomerate formed by Musk, is also in discussions to raise approximately $20bn in equity, potentially valuing the company at more than $120bn. 

If successful, this funding round would be the second-largest startup funding round on record, following OpenAI’s $40bn round earlier in 2025.  

XAI Holdings was launched in March 2025 through the merger of xAI, and X, the platform formerly known as Twitter. 

The funding comes as the European Union (EU) has initiated an inquiry into X following its acquisition by xAI, assessing potential penalties under the Digital Services Act (DSA).  

The DSA links fines to global revenue, and the combined companies’ structure is under review.  

Penalties could reach 6% of a company’s annual global revenue for failing to address illegal content, disinformation, or transparency requirements. 

The EU’s investigation into X’s alleged DSA breaches began in December 2023.  

Regulators have criticised X’s changes to its blue checkmark system, which was previously used for verified public profiles.  

The European Commission may announce X’s first DSA fine before its August recess, although delays are possible.