Elon Musk’s artificial intelligence company xAI has secured $20bn (£15.7bn) in new funding, pushing ahead with its expansion plans as its flagship chatbot, Grok, faces growing global scrutiny for its creation of sexually suggestive and inappropriate images of women and children.
The Series E funding round, announced Tuesday, exceeded xAI’s initial goal of $15 billion and attracted heavyweight backers Nvidia, Fidelity, Qatar’s private equity fund and Valor Equity Partners, a private investment firm led by Antonio Gracias, Musk’s longtime partner.
In its announcement, xAI highlighted Grok’s image-generating capabilities as a key part of its technology proposition – a move that raised eyebrows given the controversy that has now engulfed the platform.
Although xAI does not have the brand recognition of competitors such as OpenAI, the maker of ChatGPT, it has nonetheless continued to attract major funding and government contracts amid a boom in AI investment around the world. That momentum has continued despite repeated criticism of Grok’s output, including allegations of misinformation, anti-Semitic content and potentially illegal pornography.
In recent days, Grok has responded to tens of thousands of requests on the platform X run by Musk asking for the digital release of women’s clothing or the creation of sexual images without permission. Among those targeted is Ashley St Clair, the estranged mother of one of Musk’s children, who said complaints filed on the platform were not answered.
“I felt scared and traumatized,” he said, adding that the photos included personal details visible in the background. Requests for comment sent to xAI reportedly resulted in an automated response reading: “Legacy Media Lies.”
Even worse, some of the images produced by Grok reportedly involved children. In one case, a photo of a 12-year-old girl was made to show her in a swimsuit, while other warnings allegedly produced sexual images involving children as young as ten. Although Grok issued a public apology last week citing a failure in its security, other examples continued to emerge later.
This controversy caused an immediate international reaction. French ministers have referred Grok’s result to prosecutors and EU media regulators to check whether it violates the bloc’s Digital Services Act. In the UK, Technology Secretary Liz Kendall described the images as “shocking and unacceptable” and called on Ofcom to investigate. Ofcom has confirmed it is in contact with xAI to determine whether legal action is required.
In contrast, US lawmakers – where xAI is headquartered – have so far been relatively silent, despite growing calls for stricter oversight of AI tools that produce them.
The funding round will support xAI’s aggressive expansion, including the construction of large data centers in Memphis, Tennessee, and the continued 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 a large funding round amid controversy. Last summer, shortly after Grok posted antisemitic and pro-Nazi content – including calling himself “MechaHitler” – the company revealed that it had received a close to $200m contract with the US Department of Defense.
For investors, the episode emphasizes the growing tension in the field of AI: large sums of money continue to flow into border technologies, even as regulators, governments and the public struggle to comply with their social and ethical consequences.
