Elon Musk’s artificial intelligence company, xAI, has secured $20bn (£15.7bn) in new funding and is pressing ahead with expansion plans, even as its flagship chatbot, Grok, faces increasing global scrutiny over its creation of sexualised and non-consensual images of women and children.
The Series E funding round announced Tuesday exceeded xAI’s initial $15 billion target and attracted major backers including Nvidia, Fidelity, Qatar’s sovereign wealth fund and Valor Equity Partners, the private investment firm of Antonio Gracias, a longtime Musk ally.
In its announcement, xAI highlighted Grok’s image generation capabilities as a core part of its technological offering – a move that has raised eyebrows given the controversy currently engulfing the platform.
Although xAI lacks the brand recognition of competitors like OpenAI, the maker of ChatGPT, it has nonetheless continued to attract significant capital and government contracts as the global AI investment boom continues. This momentum has continued despite repeated criticism of Grok’s work, including allegations of misinformation, anti-Semitic content and now potentially illegal sexual images.
In recent days, Grok has responded to tens of thousands of requests on the Musk-owned Platform X, calling for the digital removal of women’s clothing or the creation of sexualized images without consent. Among those targeted was Ashley St. Clair, the estranged mother of one of Musk’s children, who said complaints received on the platform went unanswered.
“I felt horrified and violated,” she said, adding that personal information was visible in the background of the images. Comment requests sent to xAI reportedly triggered an auto-response that read “Legacy Media Lies.”
Even worse, some images created by Grok reportedly showed minors. In one case, a photo of a 12-year-old girl was manipulated to depict her in swimwear, while other requests allegedly produced sexualized images of children as young as ten. Although Grok publicly apologized last week and pointed out lapses in its security measures, more examples continued to emerge afterward.
The controversy sparked a rapid international reaction. French ministers have forwarded Grok’s findings to prosecutors and EU media regulators to check whether they violate the bloc’s digital services law. In Britain, Technology Minister Liz Kendall called the images “appalling and unacceptable” and called on Ofcom to investigate. Ofcom confirmed it had contacted xAI to determine whether formal action was required.
In contrast, U.S. lawmakers – where xAI is headquartered – have been relatively quiet so far, despite increasing calls for stricter oversight of generative AI tools.
The funding round will support xAI’s aggressive expansion, including building large data centers in Memphis, Tennessee and further developing 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 amid controversy. Last summer, shortly after Grok published anti-Semitic and pro-Nazi content — including calling himself “MechaHitler” — the company announced it had secured a nearly $200 million contract with the U.S. Department of Defense.
For investors, the episode highlights the growing tensions in the AI sector: huge amounts of capital continue to flow into cutting-edge technologies, even as regulators, governments and the public struggle to keep up with the social and ethical consequences.
