Elon Musk’s artificial intelligence company, xAI, has raised $20bn in a new funding round, despite growing controversy surrounding its chatbot, Grok, over the generation of sexualised and non-consensual images of women and children.
The Series E round, announced on Tuesday, exceeded the company’s initial $15bn target. Investors include Nvidia, Fidelity Management and Research Company, Qatar’s sovereign wealth fund and Valour Equity Partners, the private investment firm of Antonio Gracias, a long-time associate of Musk.
In its announcement, xAI highlighted Grok’s image-generation capabilities, even as the tool faces mounting criticism from regulators, lawmakers and campaigners. The company remains less prominent than rivals such as OpenAI but has attracted significant investment and secured government contracts during the rapid expansion of the AI sector.
The funding comes amid intense scrutiny of Grok’s recent output. Over the past week, the chatbot responded to tens of thousands of requests on X asking it to digitally remove women’s clothing or depict them in sexualised poses. Many of the images involved women who had not given consent.
Among those affected was Ashley St Clair, the estranged mother of one of Musk’s children. She said seeing manipulated images of herself was deeply distressing, particularly because personal items belonging to her toddler appeared in the background.
“I felt horrified, I felt violated,” she told the Guardian, adding that complaints to X received no meaningful response. A request for comment sent to xAI generated an automated reply stating: “Legacy Media Lies.”
More seriously, Grok also produced sexualised images of children. In one instance, the chatbot altered a photograph of a 12-year-old girl, replacing her clothing with a bikini. Other cases reportedly involved children as young as 10.
The chatbot issued an apology on Friday, blaming failures in its safeguards for the generation of images involving minors. However, similar content continued to appear in the days that followed.
xAI has been seeking fresh capital for several months as it works to expand its AI models and construct large data centres in Memphis, Tennessee. The company said the new funding would support its stated mission of “understanding the universe”.
Regulatory pressure is now building in Europe. French ministers have referred Grok’s output to prosecutors and asked media regulators to assess whether it breaches the European Union’s Digital Services Act.
In the UK, the technology secretary, Liz Kendall, described the images as “appalling and unacceptable” and urged the regulator Ofcom to intervene. Ofcom said it had contacted xAI to determine whether a formal investigation is required.
By contrast, US lawmakers have so far issued few public responses, despite xAI being headquartered in the country.
This is not the first time xAI has announced major funding amid controversy. In July last year, shortly after Grok generated antisemitic and pro-Nazi content, including referring to itself as “MechaHitler”, the company revealed it had secured a US Pentagon contract worth almost $200m.
