WSJ What’s News: "Musk Taps Into Private Credit to Fund AI Ambitions" – July 22, 2025

Hosted by The Wall Street Journal

Introduction

In this episode of WSJ What’s News, host Alex Osola delves into a myriad of pressing topics shaping today's economic and political landscape. From Elon Musk's strategic maneuvers in the artificial intelligence (AI) sector to the evolving dynamics of private credit firms and their legal requisites, the episode offers a comprehensive overview of significant developments. Additionally, discussions touch upon the impact of tariffs on the automotive industry, the ongoing Jeffrey Epstein investigation stalling the House of Representatives, and the burgeoning implications of Buy Now, Pay Later (BNPL) schemes on consumer credit.

Elon Musk's AI Ambitions and Private Credit Funding

Key Highlights:

• AI Startup Xai: Elon Musk's AI venture, Xai, is aggressively seeking up to $12 billion to accelerate its expansion plans. This capital is earmarked for procuring advanced Nvidia chips essential for establishing a colossal data center designed to train and power the AI chatbot, Grok.

• Valor Equity Partners Involvement: Under the stewardship of Antonio Gracias, Valor Equity Partners, closely linked to Musk, is negotiating with lenders to secure the necessary funds. This move underscores Musk's urgency to bolster Xai against formidable competitors like Google, Microsoft, and Meta in the fiercely contested AI arena.

• Financial Strategies: Just weeks prior, Xai successfully raised $10 billion through equity and debt offerings. To sustain its financial trajectory, SpaceX has injected $2 billion into Xai, reallocating resources within Musk’s conglomerate of companies. For instance, the $5 billion debt raised in June was collateralized using Xai's intellectual property assets behind Grok.

Notable Quotes:

• "Grok hasn't gained nearly as much traction as OpenAI's ChatGPT." – Alex Osola [00:57]
• "Musk needs all the financial firepower he can get to stay competitive in a wild and costly AI battle." – Alex Osola [00:57]

Impact of Tariffs on the Automotive Industry

Key Highlights:

• General Motors' Financial Strain: General Motors (GM) reported a substantial decline, attributing a $1.1 billion hit to new tariffs on imported cars and parts. Consequently, GM's net income plummeted by 35% in the second quarter.

• Industry-Wide Implications: As the largest automaker in the U.S., GM's struggles reflect broader challenges within the automotive sector. The imposition of tariffs in early April has ushered in increased costs, with potential ramifications anticipated to extend into the third quarter.

• Consumer Pricing Dynamics: Despite the cost pressures, GM has maintained price stability, expressing a commitment to avoiding price hikes. However, analysts predict that sustained tariff-related costs will eventually permeate the market, potentially affecting consumer prices down the line.

Notable Quotes:

• "Most analysts see the auto industry slowing down in the second half of the year, which is adding to the pressure." – Chris Otz [02:58]
• "A lot of the automakers have actually avoided raising prices... in the long run, the situation can't hold." – Chris Otz [03:37]

Jeffrey Epstein Investigation Halts House Proceedings

Key Highlights:

• House of Representatives at a Standstill: The resurgence of disputes surrounding the Jeffrey Epstein investigation has immobilized the House of Representatives. Republican leadership has deferred legislative actions until September, responding to calls from GOP members for more comprehensive disclosures related to Epstein.

• Justice Department's Stance: Despite pressure, the Justice Department has resisted releasing additional FBI probe documents. House Speaker Mike Johnson emphasized the need for "maximum transparency" but also advocated for granting the Trump administration the requisite space to manage the investigation.

• Potential Interviews: The Department of Justice is contemplating interviewing Ghislaine Maxwell, Epstein's longtime associate currently serving a 20-year sentence for sex trafficking. Deputy Attorney General Todd Blanch has initiated discussions with Maxwell's legal representation regarding her potential cooperation with federal prosecutors.

Notable Quotes:

• "He has now ordered his DOJ to do what it is we've all needed DOJ to do for years now, and that is to get everything released." – Donald Trump [05:32]
• "It's sort of a witch hunt." – Donald Trump [06:34]

Buy Now, Pay Later (BNPL) and Its Impact on Consumer Credit

Key Highlights:

• Emerging Credit Implications: BNPL services, offered by platforms like Affirm and Klarna, are gaining popularity for financing everyday purchases. The integration of BNPL data into credit scoring models by FICO marks a significant shift, potentially altering consumers' credit profiles.

• FICO's New Model: The latest FICO model incorporates BNPL usage, a first for credit scoring agencies. Initial assessments suggest that average BNPL users might experience a credit score boost. However, banks express concerns that the visibility of BNPL debt could negatively influence credit approvals.

• Banks' Response: Financial institutions are increasingly scrutinizing BNPL data, viewing it as "phantom debt" that complicates their risk assessments. Additionally, the rise of BNPL threatens traditional credit card revenue streams due to its zero-interest offerings. In response, some banks are developing similar installment-based payment options to retain market share.

Notable Quotes:

• "For the $5 billion in debt Xai raised in June, the company pledged its most prized asset, the intellectual property behind Grok, as part of the collateral." – Alex Osola [00:57]
• "It's really a positive for them [law firms]." – Chris Otz [12:27]

Private Credit Firms Expanding In-House Legal Expertise

Key Highlights:

• Increased Complexity in Deal-Making: The surge in private credit activities has led firms to seek in-house legal specialists to navigate the intricate landscape of deal structuring and regulatory compliance.

• Talent Acquisition Strategies: Private credit firms are actively recruiting seasoned lawyers from elite law firms, offering competitive compensation packages that include significant salaries and carried interest—profit-sharing arrangements that align legal expertise with investment outcomes.

• Impact on Law Firms: While law firms may view the departure of top legal talent as a loss, the ongoing collaboration with in-house teams ensures that business flows back through their channels, mitigating potential negative impacts.

Notable Quotes:

• "A lot of law firms really aren't moving mountains to keep their people from going in house." – Chris Otz [11:56]
• "It's really because they have the technical expertise to really come in and get started and get the ball rolling." – Chris Otz [11:07]

Conclusion

Today's episode of WSJ What’s News provides listeners with an in-depth analysis of significant developments in the realms of technology, finance, and politics. From Elon Musk's strategic funding moves in the AI sector to the complexities facing private credit firms and their legal infrastructures, the discussions illuminate the evolving challenges and opportunities across industries. Additionally, the episode sheds light on the broader economic implications of trade policies and emerging financial products, offering listeners a nuanced understanding of the forces shaping today's market dynamics.

Produced by: Pierre Bienname
Supervising Producer: Michael Kosmides
Host: Alex Osola

For more insights and updates, tune in to WSJ What’s News daily.