SpaceX Invests $2 Billion in xAI, Valuing Merged Company at $113 Billion

SpaceX has agreed to invest $2 billion in xAI, a significant portion of the artificial intelligence startup's recent $5 billion equity raise. This investment is one of the largest made by SpaceX, highlighting the company's commitment to advancing AI technology. The funding round is part of a broader effort by Elon Musk to deepen the ties between his various ventures, including SpaceX and xAI. The investment values the merged xAI and X, underscoring Musk's strategic vision for integrating AI into his business empire.

This is the rocket company’s first known investment in xAI and one of its biggest investments in any outside company. Elon has been using his businesses to fuel xAI’s growth since the company launched. Earlier this year, he combined xAI with X, the platform previously known as Twitter. That merger turned a small AI lab into a larger company that could use the reach of a major social platform to push its products. The newly merged company was valued at $113 billion.

Elon has been focusing on training Grok, xAI’s chatbot, which just rolled out its latest version, Grok 4. He called it “the smartest AI in the world” during the launch, after it earned top marks from benchmarking group Artificial Analysis. But the rollout hasn’t been smooth. Grok made headlines for posting racist and offensive responses to users on X. In a public apology, xAI said, “We deeply apologize for the horrific behavior that many experienced,” and added that the issue had been investigated and actions were taken to address it.

Despite that, Elon is moving forward. During the same launch, he revealed plans to embed Grok into Tesla’s humanoid robots, Optimus. He didn’t give a timeline, but the goal is to make Grok the AI system that runs the robots. Grok is already being used in one of Elon’s other companies. It powers customer service features for Starlink, the satellite internet service run by SpaceX. According to investors who spoke with Elon’s team, more collaborations between SpaceX and xAI are expected.

This isn’t the first time Elon has tapped SpaceX to support another company he owns. Years ago, he borrowed $20 million from SpaceX to help fund Tesla. He also used SpaceX equipment to launch The Boring Company. In 2022, around the time he bought Twitter, he took out a $1 billion loan from SpaceX, which he later repaid. The $2 billion investment comes at a time when SpaceX is already pouring money into the development of its new rocket, Starship. The project is behind schedule and has hit multiple roadblocks this year, including three failed test flights and an engine test that ended in a major explosion. Still, the company had over $3 billion in cash on hand recently.

SpaceX rarely backs outside companies. One of the few times it did was in 2021, when it bought a satellite communications firm for $524 million. This xAI deal is on a much larger scale, and it ties the rocket firm more deeply into Elon’s AI ambitions, just as the AI industry becomes more competitive and expensive. xAI is burning through billions to train models, just like other startups in the field. The company raised $5 billion in debt alongside its equity fundraising. One of the investors told the Journal that even more fundraising is expected later this year.

Elon left his White House advisory role under Trump’s administration after their breakup and has seemingly moved his focus fully to building up xAI. While the company has attracted big valuation numbers, it still faces pressure from better-known rivals and a need for constant capital. The $2 billion investment by SpaceX in xAI is a clear indication of Musk's ambition to push the boundaries of AI technology. This move is part of a larger $5 billion equity round, which suggests that xAI is attracting substantial interest from investors. The investment is expected to accelerate the development of AI technologies, potentially leading to breakthroughs in various fields.

The investment by SpaceX in xAI is not just a financial commitment but also a strategic move to strengthen Musk's AI endeavors. By investing in xAI, SpaceX is positioning itself at the forefront of AI innovation, which could have far-reaching implications for the aerospace industry and beyond. The merger of xAI and X further solidifies Musk's vision of creating a unified AI ecosystem that can drive advancements across his various ventures. The $2 billion investment by SpaceX in xAI is a testament to Musk's unwavering belief in the potential of AI to transform industries. This move is part of a broader strategy to integrate AI into SpaceX's operations, potentially leading to new applications and innovations. The investment is expected to fuel the development of AI technologies, which could have significant implications for the future of space exploration and other industries.