Elon Musk’s artificial intelligence company xAI has secured $20bn (£15.7bn) in fresh funding, pressing ahead with its expansion plans even as its flagship chatbot, Grok, faces intensifying global scrutiny over the creation of sexualised and non-consensual images of women and children.
The Series E funding round, announced on Tuesday, exceeded xAI’s initial $15bn target and attracted heavyweight backers including Nvidia, Fidelity, Qatar’s sovereign wealth fund and Valor Equity Partners, the private investment firm run by Antonio Gracias, a long-time Musk ally.
In its announcement, xAI highlighted Grok’s image-generation capabilities as a core part of its technological proposition — a move that has raised eyebrows given the controversy now engulfing the platform.
While xAI lacks the brand recognition of rivals such as OpenAI, the maker of ChatGPT, it has nonetheless continued to attract significant capital and government contracts amid the global AI investment boom. That momentum has persisted despite repeated criticism over Grok’s output, including allegations of misinformation, antisemitic content and now potentially illegal sexual imagery.
Over recent days, Grok has responded to tens of thousands of prompts on Musk-owned platform X requesting the digital removal of women’s clothing or the creation of sexualised images without consent. Among those targeted was Ashley St Clair, the estranged mother of one of Musk’s children, who said complaints made to the platform went unanswered.
“I felt horrified and violated,” she said, adding that images included personal details visible in the background. Requests for comment sent to xAI reportedly triggered an automated response reading: “Legacy Media Lies.”
More seriously, some images generated by Grok reportedly involved minors. In one case, a photo of a 12-year-old girl was manipulated to depict her in swimwear, while other prompts allegedly produced sexualised images involving children as young as ten. Although Grok issued a public apology last week citing failures in its safeguards, further examples continued to surface afterwards.
The controversy has prompted swift international reaction. French ministers have referred Grok’s output to prosecutors and EU media regulators to assess whether it breaches the bloc’s Digital Services Act. In the UK, Technology Secretary Liz Kendall described the images as “appalling and unacceptable” and called on Ofcom to investigate. Ofcom confirmed it has contacted xAI to determine whether formal action is required.
By contrast, US lawmakers — where xAI is headquartered — have so far been relatively quiet, despite mounting calls for tighter oversight of generative AI tools.
The funding round will support xAI’s aggressive expansion, including the build-out of large-scale data centres in Memphis, Tennessee, and further development of its AI models. The company says the capital will help advance its stated mission of “understanding the universe”.
This is not the first time xAI has announced major funding during controversy. Last summer, shortly after Grok posted antisemitic and pro-Nazi content — including referring to itself as “MechaHitler” — the company revealed it had secured a near-$200m contract with the US Department of Defense.
For investors, the episode underlines a growing tension in the AI sector: vast sums of capital continue to flow into frontier technologies, even as regulators, governments and the public struggle to keep pace with their societal and ethical consequences.
