Could xAI's $5B debt deal be affected by Musk-Trump feud?
What's the story
Elon Musk's public feud with US President Donald Trump could impact the $5 billion debt sale for his artificial intelligence company, xAI. The Wall Street Journal reported that Morgan Stanley was pitching the debt to potential investors, when Musk and Trump were publicly arguing on their respective social media platforms.
Market reaction
Morgan Stanley may need to offer additional incentives
Morgan Stanley had hoped to sell the debt at par value, but a trader told WSJ it was trading at 95 cents on the dollar during Thursday's session. Investors have also suggested that due to falling prices, Morgan Stanley might need to offer extra incentives such as an increased interest rate.
Financial outlook
Company projected to generate over $13B by 2029
Despite the public feud, xAI is projected to generate more than $13 billion in annual earnings by 2029. However, the company's current financials show it lost $341 million before interest, taxes, depreciation, and amortization in Q1. The company expects its EBITDA to reach $2.7 billion by 2027 and $13.1 billion by 2029.
Revenue projections
xAI plans to invest $18B in data centers
xAI anticipates gross revenue of $1 billion by the end of this year, growing to $14 billion by 2029. However, its cash flow from operations was negative $220 million after capital expenditures of $2.6 billion. To note, the company plans to invest around $18 billion in data centers going forward.