Musk’s new AI business is a cash-hungry monster.
Elon Musk has promised that his AI business, xAI, will help to revolutionize society. Before it can do that, however, the company is going to need to become fiscally viable—a goal it hasn’t quite met yet. Indeed, at the current moment, the company seems to be burning through cash at a rate that, in any other industry, would be entirely unsustainable.
A new report from Bloomberg claims that the AI company expects to spend at least $13 billion this year, which amounts to a little over a billion dollars per month. The outlet cites “people familiar with the deal terms who asked not to be identified because the information is private.” At the same time, the company continues to raise massive amounts of money from investors to keep up with its mind-boggling cash flows. The outlet reports:
The company is now finalizing $4.3 billion in new equity funding, and it already has plans to raise another $6.4 billion of capital next year, the company has told investors. And that is on top of the $5 billion in debt that Bloomberg has previously reported Morgan Stanley is helping it raise. The corporate debt is expected to help pay for xAI’s data center development, the people said. Other companies have decided to do project financing instead.
It was recently reported that xAI had gotten a generous infusion of investment from some of Silicon Valley’s top venture capital firms (including Google-backer Sequoia). Bloomberg notes, however, that despite the company’s “prolific fundraising efforts,” it is just “barely keeping pace with expenses” due to its immense cash burn. Gizmodo reached out to xAI for more information.
What is the company doing with all that money? xAI’s main contribution to society so far is Grok, Musk’s “anti-woke” chatbot that is, sometimes, surprisingly woke. Grok has raised eyebrows in the past, with its unprompted rants about “white genocide.” The company merged with X (the company formerly known as Twitter, which Musk bought in 2022) earlier this year. Bloomberg’s new report notes that xAI hopes to use X’s ongoing data flows (from its zillions of user- and bot-generated posts) to help continually train Grok’s algorithm.
xAI may be owned by the richest man in the world, but the company is really viewed as an underdog when it comes to the current race for AI supremacy. Musk’s company is in pitched battle against a number of other, better-positioned, better-resourced firms (like OpenAI, Meta, and Anthropic), all of which are seeking to crown themselves the definitive king of the AI boom.
As per usual, Musk has made big promises about what he believes his companies can deliver in the realm of automation, robotics, and generative AI. He has claimed that his company will eventually create a product line of domestic robots that will take care of Americans’ household tasks, and, more recently, he has promised to launch a robotaxi business. Hyperbole aside, it remains to be seen whether Musk’s company will even be able to survive these early, cash-hungry stages of its business lifecycle.
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