Elon Musk’s xAI artificial intelligence lab is on pace to turn a profit by 2028, and is currently sitting on $10 billion in cash, according to a recording of an investor pitch call reviewed by Forbes.
“[xAI is] ramping revenue very quickly and it will actually be cash flow positive here in about two and a half, three years, and they have a 10 billion cash balance today,” Valor Equity Partners’ Jonathan Shulkin said during a Wednesday call with potential investors in a financing vehicle to fund AI infrastructure for xAI. “They’re [also] raising equity. The stated amount of the round is $15 billion. I can tell you we already have that demand in hand, so it’s likely to be a lot larger.” Shulkin, who says he did a stint as xAI’s chief financial officer this summer, added that the company is using a novel financing scheme to make building data centers cheaper, faster and less of a credit risk for xAI. (Veteran banker Anthony Armstrong now serves as the company’s CFO.)
Responding to a request for comment, a spokesperson for xAI wrote “Legacy Media Lies.” An Nvidia spokesperson declined to comment. A representative for Valor Equity Partners didn’t immediately respond to a request for comment.
OpenAI believes it won’t become cash flow positive until 2030, reflecting its massive commitment to spend $1.4 trillion on AI infrastructure deals. But Anthropic has projected it will break even by 2028, according to a Wall Street Journal report, a profitability timeline in line with xAI’s projections.
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Like most AI companies, xAI’s future success relies largely on access to computing power. The data centers that provide that compute can cost upwards of $20 billion to 30 billion to build. So despite all the money the company has in the bank, it still needs more. It’s amassing it in two ways. The first is a traditional equity raise, first reported by CNBC. The second is a special purpose vehicle (SPV) that buys the guts of data centers (racks of Nvidia chips and the infrastructure that connects them) and leases them to xAI. Created by billionaire and longtime Musk confidante Antonio Gracias’ Valor Equity Partners, that financing vehicle—Valor Compute Infrastructure—is raising $7.5 billion in cash, plus approximately double that in debt, including from Nvidia (which has committed $2 billion), private equity firms Blue Owl, Apollo, GoldenTree and Marathon, and ordinary individual investors. Valor Equity Partners plans to commit between $75 million to $125 million to it as well. Valor Compute Infrastructure (VCI) plans to pay quarterly cash distributions to investors at a projected 9% internal rate of return.
VCI expects to buy $22 billion of compute via the financing vehicle, according to the recording, which also reveals that VCI plans to spend $5.3 billion on racks of Nvidia’s GB200s “that are already up and running,” tomorrow. Additional orders of the company’s fancier GB300 chips, worth over $10 billion, are slated for early next year.
“The reason xAI is doing [the financing through VCI] primarily is for cost of capital,” Shulkin said on the call. Because raising equity at xAI can cost between 40 to 50% of the funding, it doesn’t make sense for the company to use “equity capital to finance assets that have the ability to be financed in this way. This is the lowest cost way. It was an innovation in the market to use this structure.”
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