Another trillion-yuan AI unicorn on the verge of birth after a new round of 70 billion yuan in financing?

Back in October 3, 2024, OpenAI completed a $6.6 billion financing round, with a valuation reaching $157 billion, approximately equivalent to 1.1 trillion RMB, making it the world's first trillion-dollar AI unicorn. Now, after nine months, it seems that another trillion-dollar AI unicorn is about to emerge.

Recently, Morgan Stanley announced on its X account that xAI, owned by Elon Musk, has successfully completed a $5 billion debt financing (equivalent to approximately 35.8 billion RMB) and an additional $5 billion in strategic equity financing. Among them, the $5 billion debt financing includes secured notes and term loans. In addition to the debt financing, xAI is currently in negotiations for approximately $20 billion in equity financing (equivalent to approximately 143.3 billion RMB). After the completion of this round of equity financing, xAI's company valuation is expected to exceed $120 billion (equivalent to approximately 859.5 billion RMB). According to relevant media reports, some investors value xAI as high as $200 billion (equivalent to approximately 1.4 trillion RMB).

This financing is another important milestone for xAI after successfully raising $6 billion in December 2024. Adding the two rounds of financing together, xAI's total financing has reached approximately $17 billion (equivalent to approximately 15.8 billion euros).

The list of investors who participated in xAI's previous financing is quite impressive, including many well-known institutions such as Andreessen Horowitz, BlackRock, Fidelity, Sequoia Capital, NVIDIA, AMD, and sovereign wealth funds from the Middle East.

A Debt + Equity Financing

It is reported that the participants in this financing round include Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital, Fidelity Management & Research Company, Kingdom Holding Co., etc. Among them, Valor Equity Partners is a US-based venture capital firm and one of Elon Musk's loyal supporters. From Tesla to SpaceX, Val has participated in investment and support, helping Musk through many difficult times. In this xAI financing, it is no surprise that this major backer behind Musk participated again.

It is worth mentioning that this $10 billion financing adopts a debt + equity model, including $5 billion in debt financing and $5 billion in equity financing. At the same time, Morgan Stanley pointed out in its post that "the combined financing method of debt and equity aims to reduce the total cost of capital and significantly expand the available capital pool."

It is understood that Morgan Stanley played an advisory role in xAI's $5 billion debt financing this time and pointed out that the debt financing was oversubscribed, with many well-known global debt investors joining in.

Although this financing was finally successfully finalized, the process was not smooth but full of twists and turns.

According to overseas media reports, in order to complete the $5 billion debt financing initially, xAI had to adopt a strategy of increasing pricing to attract investors. The new financing plan includes $3 billion in bonds with a yield as high as 12.5%; $1 billion in fixed-rate term loans with an interest rate also set at 12.5%; and $1 billion in Class B term loans priced at 7.25 percentage points above the benchmark rate, with an issue price set at 96 cents. From this adjustment, we can clearly see that xAI faced considerable pressure in the early stage of financing. Some investors believed that the company had to increase the debt yield to ensure the smooth progress of the transaction.

The financing process was also disrupted by many external factors. The financing issuance started in early June and was originally planned to end on June 17. However, due to a series of public feuds between Elon Musk and Donald Trump recently, combined with investors' doubts about xAI's financial strength, Morgan Stanley had to extend the financing period. In addition, since xAI has not yet achieved profitability and its debt has not been rated, it is difficult for investors to accurately assess the financial risks, so they demanded a higher cost of financing. Many investors who received bond subscription invitations chose to decline. According to overseas media reports, the subscription volume of investors for this bond financing was only 1.5 times the issuance volume, lower than the 2.5 - 3 times subscription rate of similar junk bonds.

However, despite many concerns, investors finally chose to participate in this financing. Morgan Stanley specifically emphasized in its statement that this transaction was oversubscribed, which fully demonstrates the market's high recognition of xAI's vision of advancing scientific exploration and expanding human understanding of the universe.

In the financing structure, there are $3 billion in high-risk bonds with an annual interest rate of 12.5%, which means that there will be a high annual interest expense of $375 million, equivalent to a fixed quarterly interest expense of $93.75 million. If xAI's market performance fails to meet expectations (with an expected revenue of $500 million in 2025), interest payments alone will account for more than half of the operating income.

Looking back at Elon Musk's previous entrepreneurial journey, both Tesla and SpaceX achieved a turnaround after years of huge losses. This experience has made many investors full of expectations for xAI's future development, hoping that it can replicate the success of the former. Whether xAI can achieve profitability and positive cash flow growth within a reasonable time frame can only be answered by time.

Can xAI Survive with a Monthly Burn of $1 Billion?

As we all know, Elon Musk was an angel investor in OpenAI, and he even helped name the "Open" in OpenAI.

The change occurred in 2018 when Altman and Musk completely broke up over the issue of "open source or closed source." Musk firmly believes that artificial intelligence must be transparent and open to avoid risks, while Altman chose to ally with Microsoft under capital pressure and enclosed the technology within a commercial moat.

However, Musk didn't make many comments on this, and the relationship between them was peaceful. It wasn't until ChatGPT emerged, shocking the world with its performance and completely igniting the AI wave.

As the saying goes, "You're not afraid of a breakup, but you're afraid your ex is doing well." After being excluded from such a revolutionary product, Musk began to feel a bit resentful. In 2023, xAI was officially established, becoming Musk's sword to declare war on OpenAI.

xAI's main business focuses on its first AI chatbot, Grok, which was officially launched in November 2023. Grok stands out from traditional chatbots that rely on pre-trained models with its unique real-time information acquisition ability. It can capture real-time data through the X platform, providing users with comprehensive and immediate information services.

In December 2024, xAI leased a data center facility of approximately 200,000 square feet in Nevada and spent $1 billion on purchasing storage chips to meet the huge data storage needs of its AI projects. These data centers are like solid cornerstones, supporting the efficient operation of the AI system. It is worth mentioning that Musk also announced that xAI is actively developing a supercomputer called "CyberBrain," which is expected to be launched in the fourth quarter of 2025. The birth of this supercomputer may provide unprecedented computing power for AI model training and inference, helping xAI achieve a qualitative leap in complex AI algorithm research, large-scale data processing, etc.

From its inception to its rapid rise today, xAI's development is inseparable from the strong support of the capital market. In July 2023, Elon Musk personally invested an additional $100 million in xAI, bringing the company's total financing that year to $125 million, providing crucial funds for the early team building and business launch. In May 2024, xAI completed a $6 billion financing round, and the company's valuation soared to $24 billion, making it the second-highest-valued AI startup after OpenAI at that time, indicating the market's high recognition of its technology and business model. In December of the same year, xAI received another $6 billion in Series C financing, with the total financing reaching $12 billion and the valuation exceeding $40 billion, further consolidating its capital advantage in the AI field and providing sufficient resources for data center construction, AI R & D, and market expansion.

Elon Musk once said on social media, "The cost of AI training increases tenfold every year. In this race, there are only two options: either make 'crazy investments' or 'drop out'." In addition, he also disclosed xAI's profit plan, aiming to achieve profitability in 2027, two years earlier than OpenAI's target of 2029.

However, the reality is far from ideal. Behind xAI's urgent need for financing this time is the huge investment pressure and severe financial situation the company is facing.

Before this financing activity, xAI had raised a total of $14 billion through equity financing. However, as of March 31, 2025, the company only had $4 billion in cash on its books, while its estimated annual expenditure was as high as $13 billion, with an average monthly cash burn of over $1 billion. The existing funds can only support the company's operations for four months. If it fails to obtain new financing in time, the company's normal operations will be in trouble. The "financing - consuming funds - financing again" cycle that xAI is currently in is surprisingly similar to the capital game played by WeWork in the past.

High capital expenditure is one of the key factors leading to xAI's capital shortage. Elon Musk has been extremely aggressive in investing in computing power. In June 2024, xAI announced that it would build a supercomputer in Memphis, Tennessee, USA, to train its AI large model, Grok. The system was initially equipped with 200,000 NVIDIA GPUs, and Musk plans to gradually expand the scale of GPUs to 1 million. So far, this project has already cost hundreds of millions of dollars, and there will still be a large demand for capital investment in the future.

Currently, xAI's main source of income is the subscription service of X Premium, with an estimated revenue of only $500 million in 2025 and is expected to exceed $2 billion next year. However, compared with the above high expenditures, this income is negligible. In contrast, its competitor, OpenAI, has an annual recurring revenue of over $10 billion, and its business is diversified. It has also successfully won a $200 million contract from the US Department of Defense. xAI lags far behind in the commercialization process, which further exacerbates its capital pressure.

The completion of this $10 billion financing undoubtedly provides xAI with sufficient "ammunition" in the global AI race. Whether Elon Musk and his team can use this capital to effectively expand the infrastructure, significantly enhance Grok's capabilities, and stand out in the competition with strong opponents such as OpenAI to achieve its goal of "developing the world's leading AI tools" will be the focus of continuous attention in the industry.

Global Giants Compete in the AI Field

While xAI is raising $10 billion in financing, other tech giants in Silicon Valley are not willing to lag behind. In today's AI arena, the giants are making huge bets, and no one wants to be left behind at the table.

According to a report in February 2025, Microsoft, Amazon, Google, and Meta plan to increase their investment in AI technology and data center construction in 2025. This decision is based on last year's record capital expenditure. The total capital expenditure of the four giants last year was $230 billion, while this year's investment plan is as high as $320 billion.

On June 13, Meta announced that it would acquire a 49% stake in the unicorn company Scale AI for approximately $14.8 billion, boosting Scale's valuation to $29 billion. At the same time, Meta also recruited Scale AI's founder, Alexandr Wang. This $14.8 billion investment, just to recruit one talent, can be regarded as one of the most expensive recruitments in history.

Subsequently, on June 19, Mark Zuckerberg planned to invest $1 billion in the venture capital fund NFDG to attract its partners, Nate Friedman and Daniel Gross, who are currently the hottest AI investors in Silicon Valley. In addition, Zuckerberg successfully poached seven core technical backbones from OpenAI within just one week. These talents are specialized in key areas such as model architecture, multimodal algorithms, and computing power optimization. Based on the " $100 million signing bonus per person" standard mentioned by OpenAI founder Sam Altman, Meta's total cost of poaching these seven OpenAI employees may be close to $700 million.

Also in 2025, Microsoft announced that it would invest $80 billion in the development of the artificial intelligence field. Microsoft Vice Chairman and President Brad Smith revealed that Microsoft is expected to invest approximately $80 billion in building artificial intelligence data centers in fiscal year 2025 to train artificial intelligence models and deploy artificial intelligence and cloud applications globally.

As a tech giant, Microsoft is not only the main supporter of OpenAI but also has an exclusive cooperation with it, being regarded as one of the leading competitors in the global AI race. Microsoft's investment layout in the artificial intelligence field includes data center construction, AI application development, and external investment. It is reported that in the previous fiscal year ending in June 2024, Microsoft spent more than $50 billion on capital expenditure, and its $80 billion investment plan in fiscal year 2025 has set a new record, undoubtedly intensifying the competition in the AI field in 2025.

Amazon plans to invest approximately $100 billion in building AI data centers in 2025 and expand AI applications through its AWS cloud service. Google's parent company plans to increase its capital expenditure on AI data centers from $52.5 billion in 2024 to $75 billion. At the Google I/O Developer Conference in 2025, Google launched an upgraded version of the Gemini 2.5 model, comprehensively restructured its product system, and will also launch multiple AI agent projects. Tech giants such as NVIDIA and Salesforce are also actively betting on AI agents, which are expected to become the next development focus of AI technology in 2025.

While foreign tech giants are actively deploying in the AI field, domestic giants such as Alibaba, Tencent, Baidu, ByteDance, and Huawei are also accelerating their efforts in AI at an unprecedented pace.

In February 2025, Alibaba announced that it would invest more than 380 billion RMB in cloud and AI infrastructure construction in the next three years, which is currently the largest-scale AI investment among Chinese private enterprises. Tencent has also been continuously investing heavily in technology R & D. In 2024, Tencent's R & D investment reached 70.69 billion RMB, leading among domestic listed Internet companies. ByteDance, which started with its advantages in consumer applications, is now accelerating its catch - up. According to foreign media reports, ByteDance's AI - related investment in 2025 will exceed 100 billion RMB. In addition, ByteDance has also set up a special recruitment team in Silicon Valley to compete with OpenAI for top algorithm engineers.

In high - end business competition, the simplest methods are often used: poaching talents and investing heavily. Currently, tech giants are engaging in a more intense battle around AI. Who will be the final winner at this table?

This article is from the WeChat official account "Rongzhong Finance" (ID: thecapital)