SpaceX to Invest $2 Billion Into Elon Musk’s xAI

The SpaceX investment is part of xAI’s $5 billion equity fundraise announced by Morgan Stanley last month. It is the rocketmaker’s first known investment into xAI and one of its largest in another company. 

Since leaving his role in the Trump administration, Musk has turned his attention to training the latest version of Grok, which earned high marks from AI-benchmarking service Artificial Analysis for its performance following its release on Wednesday.

Musk called it “the smartest AI in the world,” though the chatbot it powers hasn’t gained nearly as much traction as OpenAI’s ChatGPT. It recently posted racist and controversial comments in response to users on X. “We deeply apologize for the horrific behavior that many experienced,” xAI said, adding that it investigated and took steps to resolve the issue. 

Grok powers customer-support features for SpaceX’s satellite internet service, Starlink, The Wall Street Journal reported. Musk’s representatives have said more business partnerships between SpaceX and xAI are likely in the future, according to investors who spoke with them.

During Musk’s release of Grok 4 this week, he said he also aims to embed Grok into humanoid robots, like Tesla’s Optimus fleet.

Musk has long used SpaceX to support his other businesses. He personally borrowed $20 million from the company to help fund Tesla early in its history and also used SpaceX’s equipment to set up his tunneling venture, The Boring Company. More recently, he turned to SpaceX for a $1 billion loan around the time he was acquiring what was then-called Twitter, which he paid back shortly after taking it out. 

SpaceX’s investment in xAI may pose risks for Musk’s space company. SpaceX’s revenue has jumped in recent years, but the company is investing billions to develop a new rocket called Starship. The experimental vehicle is behind schedule and has suffered multiple setbacks this year, including three consecutive failures in flight and a large explosion during an engine test last month.

SpaceX recently had more than $3 billion in cash on hand, the Journal has reported. The company has rarely made investments in outside ventures. A major one occurred in 2021, when it acquired a satellite-communications firm for $524 million.

At xAI, Musk is spending billions of dollars every year training AI models, an effort that mirrors the high spending levels at rival AI startups, which have similarly garnered high valuations but face almost constant pressures for cash.

The startup raised $5 billion in debt alongside its equity financing, and it is expected to raise even more money later this year, one of the investors said.

Write to Berber Jin at berber.jin@wsj.com and Becky Peterson at becky.peterson@wsj.com