Morgan Stanley has begun sharing xAI Corp.’s financial projections with select institutional investors, even as a public dispute between Elon Musk and former President Donald Trump adds uncertainty to xAI’s planned $5 billion debt offering. According to figures reviewed by investors, xAI expects to generate over $13 billion in annual earnings by 2029, though concerns tied to the Musk–Trump conflict have tempered enthusiasm for the debt sale.

xAI’s Financial Projections

On June 5, Morgan Stanley hosted meetings in New York and London for buyers willing to commit at least $50 million. Attendees reviewed xAI’s internal forecasts showing revenue climbing from approximately $1 billion in 2025 to $14 billion in 2029. The company projects operating losses of $341 million in Q1 2025 will move to positive EBITDA of $2.7 billion by 2027, rising to $13.1 billion in 2029.

These projections underscore xAI’s heavy capital requirements. In Q1 2025, xAI reported an operating cash‐flow shortfall of $220 million after $2.6 billion in capital expenditures. The company plans to spend $18 billion on data‐center infrastructure over the next several years. To fund these outlays, xAI is seeking $5 billion in debt and exploring a $300 million secondary stock sale that would value the company at $113 billion.

Musk–Trump Feud Sows Doubt

Investors are closely monitoring the public tensions between Musk and Trump, which escalated in early June over conflicting comments about technology and politics. Trump threatened to “strangle” companies that oppose him, citing legal actions against Harvard and Columbia as examples. Those comments have raised concerns that Musk’s businesses—particularly xAI and his social media platform X (formerly Twitter)—could face political or regulatory backlash.

These concerns have tangible market effects. On June 5, bond prices for X/Y‐linked debt fell by roughly 1.25 points, reflecting investor unease. While xAI’s backers have not publicly withdrawn from the debt deal, Tesla’s 14% share price drop earlier this week illustrates how Musk’s public disputes can ripple through his broader business interests.

Structure of the $5 Billion Debt Offering

Raising $5 billion in debt tied to Musk‐affiliated ventures has proven challenging. In 2024, Morgan Stanley arranged a $2 billion debt issuance for X/Y that saw cautious interest. This new offering is significantly larger and consists of:

• A Term Loan B

• A fixed‐rate term loan

• Senior secured notes

Pricing is set for June 17. To reassure investors, Morgan Stanley has offered tighter covenants than usual. xAI’s leadership believes that long‐term revenue potential—anchored by demand for AI‐powered services—will outweigh short‐term market jitters.

Capital Needs and Projections

xAI’s revenue roadmap relies on integrating its operations with X/Y, which xAI acquired in March 2024. Together, the two businesses target a 2029 revenue run rate of $80 billion for X/Y and $14 billion for xAI. To reach those figures, xAI’s data‐center spending must accelerate from $2.6 billion in early 2025 to $18 billion over the next four years.

Profitability is expected to follow closely behind revenue growth. However, as one investor at the book‐opening sessions noted, “These estimates assume favorable AI hardware pricing and strong demand; any disruption—political or economic—could delay those milestones.”

Market Reception and Risks

Despite uncertainty, several major asset managers have shown interest in xAI’s debt, indicating there is still demand for well‐priced AI‐related credits. However, at least one hedge fund has trimmed its exposure to Musk‐linked debt, citing reputational and political risks.

Additional concerns include rising interest rates, which could make floating‐rate term loans more expensive, and the possibility that AI spending may plateau if enterprise budgets shift. Regulatory scrutiny—both in the U.S. and internationally—could also create hurdles for xAI’s long‐term projections.

Next Steps

As the June 17 close date approaches, the key question is whether Morgan Stanley can place xAI’s $5 billion debt at attractive terms. At the same time, xAI plans a $300 million secondary stock sale to further bolster its balance sheet ahead of a larger equity raise later this year.

To ease political tensions, Musk and Trump reportedly agreed to a phone call on June 5 to defuse their dispute. Whether this will reassure investors remains to be seen. For Morgan Stanley and other underwriters, xAI’s success depends not only on its technological execution but also on how the political landscape evolves around its founder.