Morgan Stanley Pushes $5B Deal for Musk’s AI Firm Amid Political Fallout
In a bold financial move that intersects tech, politics, and Wall Street caution, Morgan Stanley is marketing a $5 billion package of loans and bonds for Elon Musk’s artificial intelligence company, xAI. The debt offering comes as Musk’s once-close ties with former President Donald Trump face public strain — a factor that could influence investor sentiment.
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Two Loan Structures, No Bank Commitments
According to sources familiar with the matter, the package includes two financing options:
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A floating-rate term loan B priced at 97 cents on the dollar, with a steep interest rate of 700 basis points over the SOFR benchmark.
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An alternative fixed-rate option offering 12% interest.
Importantly, Morgan Stanley is taking a “best efforts” approach — meaning it will not guarantee the full $5 billion or commit its own capital. This marks a strategic departure from the bank’s more aggressive 2022 financing of Musk’s $44 billion Twitter acquisition, which left banks stuck holding $13 billion in debt for over two years.
Timing, Politics & AI Hype
The offering comes at a sensitive moment. While investor appetite for AI continues to surge, Musk’s souring relationship with Trump — once seen as a political ally — could complicate the equation. The two recently clashed over a federal spending bill, and concerns have grown that Musk’s business ventures could face federal scrutiny or contract losses in the future.
Meanwhile, xAI is said to be exploring up to $20 billion in equity funding, with potential valuations ranging from $120 billion to $200 billion, according to multiple sources. A previously considered merger between xAI and Musk’s social media platform X has reportedly been shelved.
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