Elon Musk's XAI just close to $20 billion funding ground from NVIDIA, Fidelity and the Qatar Investment Authority, valuing the AI startup at $230 billion and putting it in direct competition with open AI for the top spot in artificial intelligence. Now, internal documents obtained by Bloomberg reveal the company burned through $7.8 billion in the first nine months of 2025, with quarterly losses accelerating from a billion dollars to 1.46 billion.
And the documents also expose something Tesla shareholders should find it deeply troubling. XAI executives told investors their goal is to build the AI that willpower Tesla's optimist humanoid robot. And why is Musk's private company developing the core technology for product that Tesla shareholders were told would be built in house? Now, there are lawsuits happening against Musk for breach of fiduciary duty right now. And we'll breakdown XA is financial picture and what it
means for the AI race. And we'll cover the Grok deepfake scandal that triggered investigations in six countries this week. We'll also examine Musk's sudden promise to open source X's algorithm in seven days. And we'll get right into that right after this very short
break. Now, Elon Musk's empire had his most turbulent week of 2026 with a $20 billion capital injection global regulatory probes in an algorithm transparency promise that some say he has made before without any sort of follow up. Now the three stories are interconnected in ways reveal the tensions inside the world's most valuable private AI company. And the $20 billion funding round closed on January 6th. Exceeding XA is original $15
billion target. NVIDIA committed up to 2 billion, according to Bloomberg. Cisco, Fidelity, Stepstone Group, the Qatar Investment Authority and Abu Dhabi's MGX sovereign wealth fund filled out the investor list. Now the round valued XAI at approximately 230 billion, placing it in the same valuation tier as Open AI and Anthropic.
Just one week earlier, Open AI had closed its own $22.5 billion round from SoftBank. The AI funding race has become a capital arms race where entry costs are now measured in 10s of billions of dollars instead of hundreds of millions of dollars. Now. These internal documents show a different picture than the headline valuations suggests. XA is revenue nearly doubled quarter over quarter 270 million from the three months ending September 30th, 2023 or 2025.
That sounds like progress until you compare it to its expenses. Though the company reported an A Bibita loss of 2.4 billion through September, exceeding its original projection of 2.2 billion for the full year, gross profit improved to 63 million in quarter 4, up from 14,000,000 the prior quarter. But the company is burning roughly a billion dollars per month on data center construction, GPU acquisitions
and also on talent. Now I've been digging through the analytics of the show and noticed that 37% of you are following this channel right now. Thank you, you're amazing. You're part of this community. The other 63% haven't hit the follower subscribe button yet. That's OK, I get it. You watch or listen to a couple episodes and you're like got to figure out what's going on. Now I'm going to ask you for a favor in one second here.
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XAI executives told investors their goal is to build AI that is itself sufficient enough and will eventually power humanoid robots like Tesla's Optimus. Now that contradicts what Musk told shareholders in 2024 when he said XAI and Tesla were solving different problems. He specifically said Tesla, with its real world AI developed through autonomous driving, would build Optimist's robot brain.
Now his private company, where he holds a larger controlling stake than he does with Tesla, is claiming that mission. Tesla shareholders have alleged in court filings that Musk diverted NVIDIA H100 chips originally ordered for Tesla to XAI. They claim he siphoned top AI talent from Tesla to staff that startup. Now this new disclosure about Optimist could become central evidence in these breach of fiduciary 2D lawsuits.
Now the second major story involves Grok, which is xai chatbot integrated into X. In the first week of January, users discovered they could prompt Grok to generate non consensual explicit images of real people, including minors. And according to content analysis from Copy Leaks, Grok was generating roughly one non consensual image per minute.
Now, researcher Genevieve O found the bot produced 7751 images in a single hour, and on January 8th, approximately 85% of all images Grok generated were of sexualized content. Now the regulatory response was swift and worldwide. The European Commission ordered X to preserve all internal documents and data related to Grok until the end of 2026. An EU spokesperson called the situation illegal, appalling and disgusting, stating it has no place in Europe.
India's Ministry of Electronics and IT issued a notice requiring X to conduct a comprehensive technical and governance review. Malaysia's Communications Commission open an investigation, France began to probe into alleged algorithm manipulation and EU KS communication regulator Ofcom requested information and warned the government could block X entirely if it refuses to comply with UK law.
Now Australia's E Safety Commissioner is reviewing reports of non consensual images in the US Senators Ron Wyden, Ed Markey and Ben Ray Lujan wrote to Apple CEO Tim Cook and Google CEO Sundar Pichai asking them to remove X from and Grok also from their app stores for violating distributing terms. Now CNN reported that in the weeks leading up to the scandal, Musk hit expressed frustration over Grok's images guardrails in
a meeting at XAI. 3 key staffers from XAI safety team, including its head of public safety and private Product Safety left the company before the controversy erupted. Timeline suggests a connection between loosened content restrictions and the departures of these people. XAIS response was to restrict image generation on X to only paid subscribers instead of just getting rid of it and setting up
these guard rails. Now they want only paid people that paid to be able to use the image generation. Very odd move. Now a move that British Prime Minister Keir Starmer spokesperson called simply turning an AI feature that allows the creation of unlawful images into a premium service that allows users to create unlawful images. Now the Groc standalone app and website still allow users to generate the same content for
free though. Now the third story this week arrived on Saturday, when Musk announced X would open source its new algorithm in seven days. The release would include all code used to determine what organic and advertising posts are recommended to users. Musk said the release would be repeated every four weeks with comprehensive developer notes. Now, this promise comes three years after Musk first said he would make Twitter's algorithm transparent.
In March 2023, X published some code on GitHub, but most files have not been updated since that initial upload. Internal versions have a advance to Grok 3, while the public repository remains frozen at Grok one now. The context around this announcement is telling, though. X uses Grok to evaluate more than 100 million daily posts and recommend content individual users.
The algorithm determines what you see in your 4U feed, and French authorities open an investigation in July 2025 into alleged bias in manipulation in that algorithm. Now, if you used to comply with France's request to share the code, calling the investigation politically motivated, European Commission extended a retention order through 2026 requiring X to preserve data related to its algorithms and handling of legal
content. Now Musk's sudden transparency pledge arrives as regulatory pressure reaches its peak. Whether the release will satisfy investigators or whether it will contain the actual code driving recommendations remains to be seen. Elon has said this before. Did not deliver. He said he would do this periodically, released the code periodically, did not deliver on it. Now the financial picture ties all three of these things together.
XAI needs to spend aggressively to compete with Open AI and Anthropic in the AI race. The company operates the Colossus supercomputer, which launched with 100,000 GP OS and is expanding to over 1,000,000 H 100 GPU equivalents. XAI announced a third data center in the Memphis area, this one across the state line in Southaven, Ms. representing a $20 billion investment and two gigawatts of computing power. Governor Tate Reeves called it the largest private investment
in Mississippi's history. The state waived all sales, corporate income, and franchise taxes. Local governments agreed to substantially reduce property taxes. And these infrastructure investments explained the burn rate Colossus and its planned expansion require massive capital expenditures before they generate returns. Now Grok threatens that investment thesis. Altogether, XAI claims 600 million monthly active users across X and Grok and the
platform. 70 million daily users provide real time training data for the AI models. If regulators in Europe, the UK, or other major markets take enforcement actions against X, that user base could completely shrink over there. If Apple and Google remove X from the app stores as Democratic senators requested, the distribution channel for Grok completely disappears and it's gone.
Musk appears to be balancing growth velocity against regulatory risk in the algorithm Transparency announcement suggests he recognizes the pressure is becoming material. This is a stop for him. He wants to show that Xai and Grok had nothing to do with this and that the users were in charge of the prompts that they gave the AI bot. Now, let me know what you think in the comments of whatever podcast platform you're on right now. Some of my own output on this, and I think it's disgusting.
You should never be able to do that with any bot. I think it's weird, it's gross. If you do this, you're a gross freak, and you shouldn't be doing this to other people. If you want to do it for yourself, that's fine. But if you do it to other people's images, you are a sick
freak and you should be banned. So that's what I think about you, not you in particular that's listening to this, but that's what I think about the people that have been doing this to other people think you're weird and you should definitely go outside or something. I don't know if you did not put up the prompt or you didn't put up the guardrails for people to stop this prompt. It's very easy. It's very, very easy. And I'm a developer.
I know, I know how easy it is. This is like the most basic thing you could do. If somebody enters this type of prompt, XYZ, XYZ whatever, XYZABC, whatever, then tell them it's not allowed. The prop could be put this person in a bikini and that should not be allowed. Or you know, take off. This person's clothes should not
be allowed at all. It's weird and it's disgusting and who knows what kind of images that could portray and if the app or the company is behind that allows that they should be held accountable because that's illegal every place that I know. So Elon is releasing this information. He's releasing the algorithms to put a buffer up and he does this all the time. This is his move. If something goes wrong, he goes, you know, I, I promised
you guys something. I'm going to give you something that's I'm just going to give you a little bit of something so you can look at it. And it's sort of to appease the people that are trying to take him out because he can't fight them, because he likes to battle, he likes to fight and he
likes to be right. But instead of that, this time, instead of putting up those guardrails and admitting that he was completely and utterly of wrong by not putting up these guardrails, he's like, here, take some of my code, check it out. Let me, I'll show you what the algorithm does. And of course, senators from the US probably have no idea how this all works, so they probably think it's a good way for them to dig in a little bit. It's not right. Get rid of this feature.
Put up those guardrails. Don't make your even though X is a trash hole right now, it's a It's a horrible, horrible place to be. It shouldn't be at that horrible. It should be less horrible than it is. And he doesn't seem to be putting up the guard rails to do that. Now let's move on a little bit of XAI and Tesla.
There's another layer here. If XAI builds the brain for Optimus while Tesla builds the body, Tesla becomes a hardware manufacturer, licensing its core intelligence from another one of Elon Musk's companies. Tesla shareholders voted in November on whether the company should invest in XAI now. The non binding proposal did not pass, but there was a significant number of abstentions, suggesting shareholder uncertainty about the relationship between the
companies. SpaceX has already invested in XAI. Tesla has spent hundreds of millions on Xai's Megapack batteries. The financial entanglement between Musk companies continues to deepen regardless of shareholder concerns. Moving money around, that's all. You know, they're building companies so they can move money around so they don't have all their money in one company. Almost a fall back. In a way. Large corporations do this. It's like how Google used to be. Google Now it's Alphabet,
umbrella companies basically. But now he has, you know, a bunch of different separate companies, but they all work with each other to get the job done now. Xai's investor presentation included the term escape velocity to describe the company's development race. The company is training Grok 5 and plans to launch Enterprise Products that leverage Grok, Colossus and X to transform how
we live, work and play. The vision is grand, according to Elon Musk. The execution carries real risks, though Xai's losses are mounting faster than projected. The Grok brand is now associated with Deepfake and Child X exploitation imagery. Regulators on 4 continents are
investigating it, and it's also part of the government. the US government pays XAI for Grok and Tesla shareholders are also asking why the company's flagship AI product might be built by a private company that they do not own. Musk closed the week with a post declaring 2026 is the Year of the Singularity. He predicted AGI would arrive this year. He said AI would surpass human collective intelligence by 20-30, and those predictions may or may not prove accurate. More than likely not.
And what is certain is that XAI just raised $20 billion to chase them. Grok generated a global scandal in the X algorithm will supposedly become public in a week. First day in 10 days of 2026 suggests that Musk's ambitions will define this year more than rockets, cars, or government efficiency ever could. And aarently they're not sending rockets to Mars this year. And that's a whole other eisode. We're going to get into that
tomorrow. So please follow and subscribe for more content like that.