Elon Musk’s artificial intelligence company, xAI, is spending about $1 billion every month. The high costs come from building advanced AI models, while the company’s revenues remain low, according to sources familiar with its finances.
This massive cash burn highlights the huge financial demands of the AI industry. At xAI, revenue growth has been slow, making it difficult to keep up with expenses.
To bridge this gap, xAI is trying to raise $9.3 billion through debt and equity, sources said. However, the company plans to spend more than half of this amount within the next three months, even before the funds are fully secured.
In 2025, xAI expects to spend around $13 billion, based on its levered cash flow shared with investors. The company’s fundraising efforts are just barely matching its spending, sources added.
A company spokesperson declined to comment. Elon Musk responded to Bloomberg’s report on social media, calling it “nonsense.”
The heavy losses stem partly from the large costs AI firms face. These include building server farms and buying specialized computer chips needed to train AI models like xAI’s Grok and OpenAI’s ChatGPT. Carlyle Group estimates that over $1.8 trillion will be invested by 2030 to build AI infrastructure, according to CEO Harvey Schwartz.
Jordan Chalfin, a senior analyst at CreditSights, said, “Model builders will raise debt and burn lots of cash. The space is very competitive, with companies fighting for technical leadership.”
Compared to rivals like OpenAI and Anthropic, xAI has struggled to generate revenue. Bloomberg previously reported OpenAI expects $12.7 billion in revenue this year. In contrast, xAI’s revenue is forecasted at $500 million this year, rising to over $2 billion next year, investors were told.
Despite the financial challenges, Musk’s wealth and willingness to invest heavily in future projects give xAI an edge. For example, Tesla burned $1 billion per quarter in 2017 while ramping up Model 3 production. SpaceX also endured years of losses pursuing space exploration goals. Still, xAI’s losses are notably large even by these standards.
xAI’s team believes they have advantages to catch up with competitors. Unlike some rivals who rent chips and servers, xAI owns much of its infrastructure and has direct access to powerful computer chips through Musk’s social media platform, X. Musk plans to buy more chips.
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