SpaceX to Invest $2 Bn in xAI to Expand Grok’s Capabilities

Elon Musk's SpaceX has approved an investment of $2 billion in his AI startup, xAI, which accounts for nearly half of the recent equity raised by the Grok chatbot maker, according to investors close to the companies, The Wall Street Journal reported.

The investment from SpaceX is part of xAI’s $5 billion equity fundraising effort, which was announced by Morgan Stanley last month. This marks the first known investment by the rocket manufacturer in xAI and is among its most substantial investments in another company.

Since stepping down from his position in the Donald Trump administration, Musk has focused on training the latest version of Grok, which received high ratings from AI-benchmarking service Artificial Analysis for its performance after its release on July 9. 

Musk has often used his business empire to support the AI startup racing to compete with OpenAI. Earlier this year, he merged xAI with X, combining a small research lab with a social media platform to boost the Grok chatbot’s visibility. The merger was valued at $113 billion.

Grok reportedly powers customer support for SpaceX’s Starlink satellite internet service. Musk’s representatives indicated that more partnerships between SpaceX and xAI may occur in the future.

During the launch of Grok 4 this week, Musk revealed plans to integrate Grok into Tesla’s Optimus humanoid robots.

Musk has frequently leveraged SpaceX to benefit his other businesses. He borrowed $20 million from SpaceX to support early Tesla operations and used its resources for The Boring Company. Recently, he obtained a $1 billion loan from SpaceX during his acquisition of Twitter, which he quickly repaid.

Although Musk described it as “the smartest AI in the world”, the chatbot hasn’t gained as much popularity as OpenAI’s ChatGPT. It recently made racist and controversial remarks on X. “We deeply apologise for the horrific behaviour that many experienced,” xAI said, adding that it investigated and took action to resolve the issue.

As per reports, SpaceX's investment in xAI could pose challenges for Musk’s aerospace firm. While SpaceX has seen a significant increase in revenue lately, the company is putting billions into the development of a new rocket known as Starship. The prototype has faced delays and has encountered several setbacks this year, including three consecutive flight failures and a major explosion during an engine test last month.