Elon Musk’s artificial intelligence startup, xAI, is reportedly spending $1 billion every month as it struggles to keep up with the high costs of developing advanced AI models. According to Bloomberg, the company’s limited revenue is being outpaced by these costs, leading xAI to seek a $9.3 billion lifeline through both debt and equity financing. More than half of this amount is expected to be utilized within the next three months, as the company has already spent most of its previously raised capital.
xAI had raised $14 billion in equity between its founding in 2023 and the start of its latest debt offering. However, by the end of March 2025, only $4 billion remained, as per investor materials. The company anticipates spending an additional $13 billion during 2025, with its fundraising efforts barely keeping pace with its expenditures.
The startup is facing stiff competition from rivals like OpenAI and Anthropic, which are ahead in terms of revenue generation. OpenAI is expected to generate $12.7 billion in revenue in 2025, while xAI projects just $500 million for the same period. Nevertheless, xAI hopes to cross $2 billion in revenue by 2026 based on investor briefings.
xAI is betting on its long-term strategy, which includes purchasing its own infrastructure rather than renting servers, a common practice among its peers. The company is also leveraging its integration with X (formerly Twitter), Musk’s social media platform, to access vast amounts of real-time content for AI model training. This reduces the need for external datasets and is seen as a key advantage.
)
Investor confidence in xAI remains high, thanks in part to Musk’s influence. The company’s valuation rose from $51 billion at the end of 2024 to $80 billion in Q1 2025. Major backers include Andreessen Horowitz, Sequoia Capital, and VY Capital. xAI is nearing the finalization of $4.3 billion in new equity funding and plans to raise another $6.4 billion in 2026. Additionally, it is working with Morgan Stanley to secure a $5 billion debt facility to support the development of AI-focused data centers.
Despite the current financial burn rate, xAI is projecting profitability by 2027, backed by its strategic infrastructure investments and integration with Musk’s other ventures.
