Just days after unveiling its latest AI model, xAI, the artificial intelligence company founded by Elon Musk, has begun preparations for a new funding round that could value it at up to $200 billion — ten times its valuation from last year.
This would mark the third major financial maneuver in less than two months, following a $10 billion debt and equity raise in July and a $300 million share sale in June. The rapid succession of funding efforts underscores xAI’s aggressive expansion plans amid fierce competition in the AI sector.
The Saudi Public Investment Fund (PIF), a sovereign wealth fund, is expected to play a pivotal role in the upcoming deal. PIF has already invested $800 million in xAI through its stake in Kingdom Holdings Company, signaling its confidence in the company’s growth trajectory. This existing investment positions PIF as a key player, potentially deepening its influence as xAI seeks to bolster its infrastructure and AI capabilities.
However, the valuation process raises questions. The Financial Times suggests a potential valuation of up to $245 billion, factoring in xAI’s ownership of X, the social media platform formerly known as Twitter. This figure seems puzzling, as X was integrated into xAI earlier this year, with the combined entity valued at $113 billion during a bond issuance just a month ago.
The discrepancy suggests either a miscalculation or an unconventional approach to valuation, possibly double-counting X’s worth or reflecting speculative optimism about future earnings. xAI’s recent financial moves — $5 billion in debt and $5 billion in equity in July, plus the June share sale—already pushed its valuation to $113 billion, making the leap to $200 billion or higher appear ambitious.
Critics might argue that this rapid valuation escalation reflects market hype rather than solid fundamentals. xAI’s latest AI model launch has generated buzz, but the company’s ability to justify such a valuation hinges on delivering sustained revenue growth and operational success.
Projections of over $13 billion in annual earnings by 2029, as cited by Morgan Stanley, fuel this optimism, yet the company’s current $1 billion revenue target for 2025 remains unproven. The inclusion of X, acquired for $33 billion and integrated into xAI’s $80 billion valuation in March, complicates the picture further, especially if the FT’s $245 billion estimate separately accounts for it.
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Musk has publicly stated that xAI is not actively seeking funds, claiming sufficient capital, which adds intrigue to the funding talks. Whether this round materializes and at what valuation remains uncertain, but it highlights the high-stakes race in AI development.
With PIF’s involvement and xAI’s bold financial strategy, the outcome could reshape the industry — or expose the limits of speculative investment in a volatile market.
