(Reuters) -Elon Musk’s artificial intelligence startup xAI is in talks to raise $4.3 billion through an equity investment on top of its $5 billion debt funding plans, Bloomberg News reported on Tuesday, citing information shared with investors.

Between its founding in 2023 and when the debt sale was launched this year, xAI raised $14 billion through equity fundraising, the report said.

High Costs Drive Funding Needs

Training and deploying advanced AI systems are exceedingly expensive, driven by costly hardware, intensive compute and the need for skilled employees in a fiercely competitive market.

The Grok chatbot maker needs new funding, partly because it has already spent most of what it previously raised, according to the report.

Morgan Stanley, the bank in charge of the debt sale, declined to comment, while xAI did not immediately respond to Reuters’ requests for comment.

Debt Sale Commitments Due

Commitments for the $5 billion debt sale are due Tuesday, the report said, citing a person with knowledge of the matter.

Additionally, xAI may also get a $650 million rebate from one of its manufacturers that will help the firm cut costs, according to the report.

Valuation Jumps Amid AI Competition

XAI, which acquired X earlier this year, is said to have a valuation of $80 billion at the end of the first quarter, up from $51 billion at the end of 2024, the report said.

Rival OpenAI had said in March it would raise up to $40 billion at a $300 billion valuation in a new funding round led by SoftBank Group.

Musk co-founded OpenAI in 2015, but stepped down from the company’s board in 2018.

(Reporting by Jaspreet Singh in Bengaluru; Editing by Leroy Leo)