Bankers for Elon Musk’s artificial intelligence venture, xAI, are reportedly exploring options to reduce the company’s substantial debt load, a move that comes as SpaceX, another Musk-led entity, gears up for a potential public offering later this year. The report from Bloomberg suggests a new financing strategy is being considered to alleviate interest costs associated with the debt.
xAI’s Financial Landscape
Over the past few years, xAI has accumulated approximately $18 billion in debt. This financial burden is understood to stem partly from the acquisition of the social media platform X (formerly Twitter) and the establishment of xAI itself. The proposed financing efforts aim to ease the immediate financial pressure, especially with SpaceX’s anticipated initial public offering (IPO) on the horizon, an event that Musk has publicly indicated is coming.
Key Financial Institutions Involved
Sources familiar with the matter suggest that Morgan Stanley is expected to play a primary role in orchestrating any new financing plan. Alongside Morgan Stanley, other major financial institutions anticipated to be involved in leading SpaceX’s potential IPO include Goldman Sachs, Bank of America, and JPMorgan Chase & Co.
Debt History and X’s Financials
Musk’s ventures have faced scrutiny in debt markets, particularly following the acquisition of X. The social media company, purchased with a $12.5 billion financing package, reportedly incurs tens of millions of dollars in monthly interest payments. This debt is held by a consortium of banks including Bank of America, Barclays, Mitsubishi UFJ Financial, BNP Paribas SA, Mizuho, and Société Générale SA. X was merged with xAI in March, with the combined entity valued at $45 billion, inclusive of debt.
SpaceX-xAI Merger and Future Goals
The recent announcement of SpaceX’s merger with xAI earlier this month aligns with Musk’s broader vision. This integration is seen as a strategic step towards developing space-based solutions for data centers, potentially offering lower-cost orbital alternatives. Musk has previously articulated that “In the long term, space-based AI is obviously the only way to scale… The only logical solution, therefore, is to transport these resource-intensive efforts to a location with vast power and space.” The merger is anticipated to leverage revenues from Starlink expansion, the upcoming IPO, and AI applications to support ambitious projects, including the acceleration of lunar base development.
