According to the Wall Street Journal, weeks after the startup raised $10 billion through stock and debt sales, Musk’s long-time financier Antonio Gracias is working to line up another $12 billion, sources say.
Gracias’s Valor Equity Partners is talking to lenders about a complex deal to buy a mountain of Nvidia chips and lease them back to xAI for its next mega data centre.
Musk desperately needs the firepower. Grok, xAI’s chatbot, is lagging far behind OpenAI’s ChatGPT in traction and reputation. Earlier this month it went off the rails on X with racist, offensive comments before the company apologised for what it called “horrific behaviour.” Meanwhile, the likes of Google, Microsoft and Meta are ploughing billions into their own models with deep-pocketed cloud giants carrying the training costs. Musk does not have that luxury.
So far he has been juggling money between his own empire. SpaceX quietly injected $2 billion into xAI, effectively robbing one Musk piggy bank to feed another. When xAI raised $5 billion in debt in June, it pledged its crown jewel, the intellectual property behind Grok, as collateral.
And it still is not close to enough. xAI is burning cash at a terrifying rate. Projections shared with potential creditors put its 2025 cash burn at $13 billion. The company generates only a sliver of revenue and is nowhere near profitable.
Leasing chips instead of outright buying them might soften the blow but it locks xAI into ongoing payments. For lenders, there is some comfort in knowing they could seize and rent out the hardware or even the Grok code itself if things go pear-shaped.
Valor has been Musk’s financial shadow for years, backing SpaceX, Tesla, SolarCity, The Boring Company and Neuralink. Now it is arranging a funding vehicle that would inject its cash then borrow billions more from private credit funds to pay for Colossus 2, xAI’s next jumbo data centre.
xAI built its first Colossus in Memphis in just 122 days with 100,000 Nvidia GPUs, then doubled it to 200,000 in another 92 days.
Nvidia boss Jensen Huang said last year. ““That is like superhuman. Elon is singular in his understanding of engineering and construction and large systems and marshalling resources.” Musk now wants one million chips powering Grok.
But not everyone is eager to sign the cheque. Some lenders want tighter terms, shorter repayment timelines of around three years and lower borrowing limits. They know AI chips depreciate fast as newer, better ones hit the market. Demand for data centres could dip or, worse, xAI could implode.
The $5 billion xAI already borrowed came at a steep cost, bonds yielding 12.5 per cent secured by data centres, Nvidia chips and Grok itself. That debt limits its future borrowing capacity to another $5 billion, excluding any chip leases.
In the event of default, lenders could rent out Colossus to other AI outfits or flog a Musk-built AI model that is already baked into his wider ventures.
For now, Valor is still hammering out terms. The deal could close in weeks or collapse entirely if no one wants to carry Musk’s latest gamble.
