RM xAI Secures $20 Billion Funding Round Amid Rapid Growth and Rising Regulatory Scrutiny
Elon Musk’s artificial intelligence company, xAI, has secured $20bn in fresh funding, exceeding its original target and pushing its valuation to more than double what it was last spring. The announcement comes despite rising regulatory and public concern over illegal content produced by its AI tools.
The company, which develops the Grok chatbot and underlying AI models, had initially aimed to raise $15bn at a valuation of around $230bn. However, xAI confirmed on Tuesday that investor demand led to a larger round. Key participants included Valor Equity Partners, Fidelity Investment Management, the Qatar Investment Authority, and Abu Dhabi-based fund MGX.
Major technology firms Nvidia and Cisco joined as strategic investors, with xAI noting that their involvement would strengthen its computing capabilities. Nvidia, in particular, supplies the advanced chips used to train and operate xAI’s models.
Earlier this year, xAI raised $10bn through a mix of debt and equity to finance the construction of its Colossus data centre in Memphis, Tennessee. In addition, the company sold $300mn worth of shares via a secondary offering in June.
The funding news arrives amid heightened scrutiny of xAI’s image-generation tools, after Grok was found to produce sexualised images of both minors and adults, including non-consensual “undressing.” The issue has drawn sharp criticism from regulators.
UK technology minister Liz Kendall described the content as “absolutely appalling” and stressed that xAI must address the matter immediately. Under UK law, the creation or distribution of non-consensual intimate images or child sexual abuse material—including AI-generated content—is illegal.
In response, xAI stated on X that it actively removes illegal content, including child sexual abuse material, permanently bans offending accounts, and cooperates with law enforcement and government authorities when required. The company added that users who prompt Grok to generate illegal material will face the same penalties as those who upload such content directly.
In March, xAI acquired the social media platform X in a $45bn deal, uniting two of Musk’s businesses. The merger allows the company to integrate data, computing infrastructure, personnel, and users across both platforms. According to xAI, the combined ecosystem now reaches more than 600 million monthly active users, with Grok easily accessible within the X app and comment sections.
Looking ahead, xAI said it is currently training the next generation of its large language model, Grok 5, and plans to introduce new products for both consumers and enterprises. The company is also developing AI models to support future expansion into gaming and robotics, as previously reported by the Financial Times.
