Morgan Stanley has launched a US$5 billion debt offering for xAI Corp., the AI company founded by Elon Musk.

The package, initiated on June 2, includes a term loan B, a fixed-rate term loan, and senior secured notes.

The funds raised will be used for general corporate purposes. Commitments are due by June 17.

This comes after a Financial Times report that xAI is also conducting a US$300 million stock sale, valuing the company at US$113 billion.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ AI companies are commanding unprecedented valuations despite limited revenue

xAI’s $113 billion valuation places it among the highest-valued private AI companies, demonstrating the premium investors are willing to pay for AI capabilities.

This valuation comes in a market where LLM vendors specifically command average revenue multiples of 44.1x, significantly higher than other technology sectors 1.

For context, the $113 billion valuation puts xAI in the upper echelon of private companies globally, despite being founded less than two years ago with limited commercial products.

This pattern of sky-high valuations for AI companies continues a trend seen throughout 2024 and 2025, where investors have prioritized future potential over current financial performance.

The valuation gap between AI startups and traditional tech companies highlights how investors view AI as a fundamentally different asset class with greater growth potential.

2️⃣ AI infrastructure development requires unprecedented capital intensity

The $5 billion debt package for xAI highlights the massive capital requirements for building competitive AI infrastructure in 2025.

Training cutting-edge AI models now requires billions in investment before generating meaningful revenue, creating a high barrier to entry that favors well-connected founders like Musk.

This capital intensity is evident across the AI landscape, with 49 startups raising over $100 million in 2024 alone, and several securing billion-dollar rounds 2.

Recent xAI developments