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xAI secured $5 billion debt financing to improve Grok AI

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xAI, a generative AI company, has completed the $5 billion debt, as confirmed by Morgan Stanley. This financing includes secured notes and term loans, which will help the company ensure progress for its AI technologies.

A statement published by Morgan Stanley on X described the financing as oversubscribed, which means the investor demand exceeded the amount of debt offered, and it includes prominent global debt investors.

The loan was offered at 97 cents on the dollar with an interest rate of 700 basis points (7%) above the Secured Overnight Financing Rate (SOFR), a standard for pricing loans. It has a fixed interest rate of around 12%.

“The combination of debt and equity reduces the overall cost of capital and substantially expands pools of capital available to xAI,” wrote Morgan Stanley.

xAI $5 billion debt

Last December, xAI raised $6 billion in Series C funding with participation of A16Z, Blackrock, Fidelity Management & Research Company, Kingdom Holdings, Lightspeed, MGX, Morgan Stanley, OIA, QIA, Sequoia Capital, Valor Equity Partners and Vy Capital and other investors.

xAI’s strategic investors, Nvidia and AMD, also participated in the funding round to show their commitment to the growth of the AI industry.

Since then, the company has come far ahead; it’s now operating the world’s largest AI supercomputer, Colossus, in Memphis. It has 200,000 Nvidia GPUs running at full capacity to power the latest Grok AI model. The first phase of this facility took 122 days to build and 19 days to become fully functional. The next 100k added within 92 days.

xAI Supercomputer Cluster with 200000 Nvidia GPUs

Source – xAI

Its current generation model – Grok 3 has improved reasoning and performance over Grok 2 released last year. However, Grok 4, the upcoming version, will bring an even more performance boost to users. This new model is expected to solve one of the biggest issues with AI models in the reply system and bring more accurate and fact-driven information. This new $5 billion debt financing comes as xAI is preparing to release Grok 4 this month.

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