In a landmark deal shaking the artificial intelligence industry, Elon Musk's AI venture, xAI, has successfully secured a staggering $20 billion in its latest funding round. This colossal investment significantly surpasses earlier targets and catapults the company's valuation to an estimated $230 billion.
Strategic Investors and a Notable Rivalry
The funding round saw participation from a powerful consortium of investors. Most notably, chipmaking titan Nvidia has joined as an investor. This move is particularly significant because Nvidia is also a major partner to xAI's primary rival, OpenAI. In September 2025, Nvidia committed up to $100 billion to build AI infrastructure for OpenAI, aiming to deploy 10 gigawatts of computing power by late 2026.
Other investors in this round include Cisco Investments, alongside existing backers like Fidelity, the Qatar Investment Authority, and Abu Dhabi's MGX. Prior to the round's closure, Musk had dismissed reports of a $15 billion goal as "false" on his platform, X, which xAI now owns and operates after a merger in March 2025.
Capital Deployment and Market Context
The freshly acquired capital is earmarked for a major expansion of xAI's data centre infrastructure and the development of future iterations of its Grok AI models. The company recently revealed that its "Colossus" supercomputer uses over one million AI chips for training. This funding highlights the sky-high valuations in the AI sector, where OpenAI reached a $500 billion valuation and Anthropic hit $350 billion in late 2025.
Controversies and Government Backing
Despite its financial success, xAI is navigating significant regulatory challenges. Authorities in Europe, India, and Malaysia have launched new investigations after its Grok chatbot allegedly generated non-consensual intimate images of adults, mostly women, and sexual images of children, which were widely shared on X.
Furthermore, the company's primary data centre construction in Memphis, Tennessee, which uses natural gas-burning turbines, has raised air quality concerns among local residents and researchers.
Interestingly, despite these controversies, xAI secured a deal with the US Department of Defense, which recently added Grok to its AI platform. Grok also serves as the main chatbot for prediction platforms Polymarket and Kalshi.
