Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favorite stories in this weekly newsletter.
Elon Musk’s xAI is launching a $300 million share sale that values the group at $113 billion, as the world’s richest man returns to his business empire and the race to develop artificial intelligence heats up.
The deal will allow staff to sell shares to new investors, according to sources close to the situation, validating the price tag struck when Musk’s xAI start-up acquired his social media service X in March.
The secondary stock offering, known as a tender offer, is expected to be followed by a larger investment round in which the company will offer new equity to outside investors, one of the sources said.
The March takeover valued the overall group at $113 billion: pricing xAI at $80 billion with X at $33 billion. Musk bought X, formerly Twitter, for $44 billion in October 2022.
xAI declined to comment.
The new share sale comes after Musk, who helped bankroll Donald Trump’s US presidential campaign, stepped back last week from his role heading the administration’s cost-cutting initiative. His time at the so-called Department of Government Efficiency (Doge) came to an end after he clashed with cabinet secretaries and criticized central parts of the Trump administration’s policy agenda.
The Tesla and SpaceX chief said he was refocusing on his business holdings after his companies suffered what he called “blowback” over his ties to the president.
“Back to spending 24/7 at work and sleeping in conference/server/factory rooms,” Musk wrote on X late last month. “I must be super focused on X/xAI and Tesla. as we have critical technologies rolling out.”
Musk has said the combined group will allow his two companies to benefit from combining models, computing power, distribution, and talent. For instance, AI developers can better train their models on the social media group’s data and tap its audience.
However, he did not disclose further specifics on how the March deal was structured. The opaque transaction allowed X, which had alienated some advertisers after adopting Musk’s hands-off approach to content moderation, to leverage the rising value of xAI.
The AI start-up obtained a $45 billion valuation in a $5 billion private funding round late last year. Musk last year granted investors that backed his Twitter acquisition — including large venture capital firms such as Sequoia Capital and Andreessen Horowitz — 25 per cent of the shares in xAI.
The tie-up between the companies was discussed with input from only a few close Musk confidants, according to a number of backers of X and xAI.
xAI is also seeking to borrow $5 billion through a package of loans and high-yield bonds in a deal led by Morgan Stanley, said two people familiar with the offering. Morgan Stanley did not immediately respond to a request for comment on the fundraising, which was first reported by Bloomberg.
Musk launched xAI in 2023 to take on Sam Altman’s OpenAI and other Big Tech rivals. It quickly unveiled the Grok chatbot and built a supercomputer cluster dubbed Colossus, one of the biggest AI data center projects in the US.
As well as competing with Big Tech and the sometimes rough-and-ready image of Grok, Musk has also agreed partnerships. Last month, Microsoft announced it was making xAI models available to its cloud computing customers, while messaging app Telegram agreed to distribute Grok to its 1 billion users.
Musk’s renewed focus on his business empire also coincides with a new financing round for his brain implant start-up Neuralink. The company has raised $600 million at a valuation of $9 billion, excluding the new investment, said multiple sources with knowledge of the deal. Neuralink was last valued at $3.5 billion in a 2023 funding round.
