Elon Musk's company SpaceX, which builds rockets and provides satellite internet, has agreed to invest two billion dollars in his artificial intelligence (AI) startup xAI, The Wall Street Journal reports (unpaywalled copy).
This investment is nearly half of xAI's recent five billion dollar equity raise. Investors familiar with the matter shared this information. Musk has often used his various businesses to support each other, and this move helps xAI catch up to leading AI firms like OpenAI.
Earlier this year, Musk merged xAI with his social media platform X. This merger combined a small research lab focused on AI with a large online network, valuing the new entity at 113 billion dollars. The merger helps spread xAI's large language model (LLM) Grok. SpaceX's investment is its first known funding into xAI. xAI also raised five billion dollars in debt alongside the equity, and plans more fundraising later this year.
xAI recently released Grok 4, described by Musk as the smartest AI available. Grok now helps with customer support for SpaceX's Starlink, a service that provides internet via satellites orbiting Earth.
Future plans and risks
Musk aims to integrate Grok into humanoid robots, like those from his car company Tesla called Optimus. Musk has a history of cross-support among his ventures. For example, he borrowed money from SpaceX to fund Tesla early on and used its resources for his tunneling business, The Boring Company. He also took a one billion dollar loan from SpaceX during the purchase of X's precursor Twitter, repaying it quickly.
This investment could bring risks for SpaceX, which has growing revenue but is spending billions on its new Starship rocket. Starship is an experimental vehicle for space travel that has faced delays, flight failures, and an engine explosion recently. SpaceX had over three billion dollars in cash reserves, but it seldom invests in other firms; one notable past investment was 524 million dollars for a satellite company in 2021. At xAI, high costs for training AI models mirror those at rival startups, driving the need for constant funding despite high company values.