Elon Musk’s artificial intelligence company xAI has raised $20 billion (£15.7 billion) in new funding, pushing ahead with expansion plans even as its flagship AI chatbot, Grok, faces global criticism for generating sexualised and non-consensual images of women and children.
The Series E funding round, announced Tuesday, exceeded xAI’s original $15 billion target and attracted major backers including Nvidia, Fidelity, Qatar’s sovereign wealth fund, and Valor Equity Partners, the investment firm led by Musk ally Antonio Gracias. xAI highlighted Grok’s image-generation capabilities as a core part of its technology, a decision that has drawn attention amid mounting controversy over the chatbot’s output.
Despite lacking the brand recognition of rivals such as OpenAI, xAI has continued to secure significant investment and government contracts during the ongoing global AI boom. The company has maintained momentum despite repeated criticism of Grok, including allegations of misinformation, antisemitic content, and now potentially illegal sexual imagery.
Reports indicate that Grok responded to tens of thousands of prompts on Musk-owned platform X requesting digital removal of clothing or the creation of sexualised images without consent. Among those affected was Ashley St Clair, the estranged mother of one of Musk’s children, who said her complaints were ignored. “I felt horrified and violated,” she said, noting that personal details were visible in some images. Attempts to contact xAI reportedly triggered an automated response reading: “Legacy Media Lies.”
Some generated images 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 depictions of children as young as ten. Grok issued a public apology last week citing failures in safeguards, but further problematic images have continued to surface.
The controversy has prompted swift international reaction. French ministers have referred Grok’s output to prosecutors and EU media regulators for review under the bloc’s Digital Services Act. In the UK, Technology Secretary Liz Kendall described the images as “appalling and unacceptable” and asked Ofcom to investigate. Ofcom confirmed it has contacted xAI to determine whether formal action is necessary. US lawmakers, where xAI is based, have so far remained relatively quiet despite growing calls for stricter oversight of generative AI.
xAI said the new funding will support the construction of large-scale data centres in Memphis, Tennessee, and further development of its AI models as part of its mission to “understand the universe.” Last year, the company secured a near-$200 million US Department of Defense contract shortly after Grok posted antisemitic and pro-Nazi content, highlighting the ongoing tension between investor interest and public concern over AI ethics.
The episode underscores a growing dilemma in the AI sector: vast amounts of capital continue to flow into frontier technologies even as regulators and governments struggle to address their societal and ethical consequences.
