xAI opens $5 billion debt offering backed by Morgan Stanley

Elon Musk is arranging a $5 billion debt sale for his artificial intelligence startup xAI Corp., the latest funding move as he steps away from politics and refocuses on his companies.

According to  Bloomberg’s source with direct knowledge of the deal, Morgan Stanley is marketing the sale of xAI’s debt. The money could help Musk to keep spending on AI infrastructure as he expands a large data center in Memphis.

Musk announced last week that he will step back from politics and concentrate on his businesses. In recent months, he served as a senior adviser and frequent companion to President Donald Trump. He campaigned for Trump in the 2024 election and was one of his top supporters.

During his time in Washington, where he led a government cost-cutting effort called the Department of Government Efficiency, Musk faced sharp criticism. Observers also worried about how his companies were doing.  Since the inauguration, shares of Tesla Inc. have fallen by about 20%.

Musk to sell $300 million in xAI stock through secondary offering

Along with Monday’s xAI debt offering, Musk raised $650 million for his neurotechnology firm, Neuralink Corp. According to the Financial Times , he is also selling $300 million of xAI shares in a secondary stock sale.

The person, who asked not to be identified because the details are private, said the debt deal consists of three parts. A term loan B, a fixed-rate term loan, and senior secured notes. Proceeds are meant for general corporate needs, with commitments required by June 17.

Musk recently merged xAI with his social-network platform X under a single umbrella called XAI Holdings.

He has poured money into building out the Memphis data center, known as Colossus, and the debt sale could help pay for it. That facility already operates 200,000 graphics processing units (GPUs) to train its AI models, and Musk told CNBC on May 20 that he plans to add another 1 million GPUs at a nearby site.

Earlier reports from Bloomberg said xAI was in conversations to raise roughly $20 billion from investors, highlighting strong interest in artificial intelligence and reflecting Musk’s influence in both business and politics.

Morgan Stanley and Musk go back several years

Morgan Stanley advised Musk on his acquisition of X, then called Twitter Inc., in 2022 and led a group of lenders that provided debt financing for the $44 billion deal.

Those lenders planned to immediately sell the loans to investors, but concerns about Twitter’s business and some of Musk’s unpredictable choices left banks holding about $13 billion of risky debt for more than two years.

This year, Morgan Stanley relaunched the sale process and finally sold the remaining debt in April, as optimism about Musk’s business prospects grew.

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