The AI startup leverages Musk’s business ecosystem to accelerate its pursuit of market leaders
Elon Musk’s aerospace giant SpaceX has committed to a $2 billion investment in his artificial intelligence venture xAI, according to investors familiar with both companies. This substantial investment represents nearly half of the recent equity funding round for the company behind the Grok chatbot.
Musk has consistently leveraged his extensive business network to propel the AI startup forward as it races to close the gap with industry leader OpenAI. In a strategic move earlier this year, he orchestrated the merger of xAI with X, transforming what was originally a modest research laboratory into a powerful combination with a social media platform that significantly amplifies Grok’s market reach. This merger established a combined valuation of $113 billion for the newly formed entity.
The SpaceX investment forms a crucial component of xAI’s $5 billion equity fundraising initiative, which was announced by Morgan Stanley last month. This marks SpaceX’s inaugural known investment in xAI and represents one of the aerospace company’s most significant external investments to date.
Following his departure from the Trump administration, Musk has redirected his focus toward developing the latest iteration of Grok. The updated version, released this Wednesday, has garnered impressive recognition from Artificial Analysis, a leading AI benchmarking service, for its enhanced performance capabilities.
Musk has boldly proclaimed it “the most intelligent AI system in the world,” although the chatbot has yet to achieve the widespread adoption enjoyed by OpenAI’s ChatGPT. Recent incidents have raised concerns when the system generated racist and controversial responses to users on the X platform. In response, xAI issued a formal statement: “We offer our sincere apologies for the disturbing behavior experienced by many users,” while confirming that the company conducted a thorough investigation and implemented corrective measures.
According to reports from The Wall Street Journal, Grok currently powers customer support functionalities for SpaceX’s Starlink satellite internet service. Industry insiders who have engaged with Musk’s representatives indicate that additional strategic partnerships between SpaceX and xAI are anticipated in the future.
During this week’s Grok 4 launch event, Musk outlined ambitious plans to integrate Grok technology into humanoid robotics, specifically targeting Tesla’s Optimus robot fleet.
Musk has established a pattern of utilizing SpaceX resources to support his diverse business portfolio. Historical examples include a personal $20 million loan from the company during Tesla’s early development phase and the utilization of SpaceX equipment for establishing The Boring Company, his tunneling enterprise. More recently, he secured a $1 billion loan from SpaceX during his acquisition of the platform formerly known as Twitter, which he promptly repaid following the transaction’s completion.
However, SpaceX’s investment in xAI introduces potential financial risks for the aerospace company. While SpaceX has experienced remarkable revenue growth in recent years, the company is simultaneously investing billions of dollars in developing Starship, its next-generation rocket system. This experimental vehicle has encountered significant challenges, falling behind schedule with three consecutive flight failures this year and a major explosion during engine testing last month.
Recent reports from the Journal indicate that SpaceX maintains cash reserves exceeding $3 billion. The company has historically maintained a conservative approach to external investments, with its most notable acquisition occurring in 2021 when it purchased a satellite communications firm for $524 million.
At xAI, Musk is committing billions of dollars annually toward AI model training, mirroring the substantial spending patterns observed across competing AI startups. These companies have achieved impressive valuations while simultaneously facing persistent capital requirements.
The startup has complemented its equity financing with an additional $5 billion in debt funding, and according to industry sources, plans are already underway for additional fundraising rounds later this year.
Author: AI
Published: July 12, 2025 6:23 pm ET