Elon Musk is doing everything he can to keep his AI startup, xAI, competitive in the fast-moving artificial intelligence market. Indeed, according to The Wall Street Journal, after recently raising $10 billion through a mix of stock and debt sales, xAI is now working with Valor Equity Partners to raise up to $12 billion more. This funding would go toward leasing advanced Nvidia (NVDA) chips for a massive new data center that will power xAI’s AI chatbot, Grok. In addition, Valor, which is led by Musk’s longtime ally Antonio Gracias, is talking to lenders to make this deal happen.
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Interestingly, Musk’s strategy is aggressive and unconventional. Since xAI’s finances are already strained, Musk has resorted to shifting money around from his other companies. For example, SpaceX recently invested $2 billion into xAI. Separately, in June, xAI raised another $5 billion by using Grok’s software as collateral. Furthermore, unlike competitors like OpenAI or Anthropic, which get support from cloud giants, xAI is building its own expensive AI infrastructure. As a result, the company is burning through cash at an alarming rate. More specifically, xAI is expected to spend about $13 billion in 2025, despite being unprofitable and bringing in very little revenue.
So far, xAI has managed to build a massive data center in Memphis, called Colossus, which started with 100,000 Nvidia chips and doubled to 200,000 just three months later. Now, Musk wants to scale up to one million chips. To do this, xAI and Valor are working on a financing plan where Valor would buy the chips and lease them back to xAI. But negotiations are still ongoing due to disagreements about the loan size and repayment timeline. If xAI can’t pay, lenders could take over the chips or lease the facility to someone else. Despite the risks, many investors still believe in Musk thanks to his past success.
What Is the Prediction for Tesla Stock?
When it comes to Elon Musk’s companies, most of them are privately held. However, retail investors can invest in his most popular company, Tesla (TSLA). Turning to Wall Street, analysts have a Hold consensus rating on TSLA stock based on 13 Buys, 13 Holds, and eight Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average TSLA price target of $299.52 per share implies 10.3% downside risk.
