CPP Investments lent $300M to Elon Musk’s xAI data centre amid Grok deepfake controversy
CPP Investments disclosed a $300 million US loan to xAI for a Memphis data centre. The move has drawn criticism over Grok’s sexualized deepfake outputs and renewed debate about pension fund ethics.
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By Torontoer Staff
CPP Investments disclosed a $300 million US loan, about $415 million CAD, to Elon Musk’s xAI to help build a second data centre in Memphis, Tennessee. The investment, revealed in CPP Investments’ first-quarter fiscal 2026 report, has sparked concern because xAI operates Grok, an AI chatbot whose image-generation feature has produced sexualized deepfakes, including images of women and children.
CPP Investments manages assets funded by more than 22 million Canadian contributors. The fund has been increasing exposure to artificial intelligence, citing the sector’s growth potential, while critics say the deal raises reputational and ethical questions for a public pension investor.
CPP Investments’ rationale
CPP Investments describes the loan as a broadly syndicated financing that supports a physical facility rather than a direct bet on any single consumer product. In a statement, spokesperson Michel Leduc said the fund’s thesis is broad and that lending for data centre capacity is not an endorsement of specific product features.
xAI is the corporate platform that builds and operates multiple assets, of which Grok is one interface and one distribution channel. It is tempting for headlines to compress 'xAI = Grok.'
Michel Leduc, CPP Investments
Leduc acknowledged misuse of Grok’s image feature and said the fund will press for safeguards as a condition of continued confidence. He listed demands including hard blocks for non-consensual sexualized imagery, independent safety assessments, transparency reporting, clearer accountability between model and moderation teams, and board-level oversight.
Labour groups and public concern
Labour advocates and consumer advocates have pushed back. Chris Roberts, director of social and economic policy at the Canadian Labour Congress, said many CPP contributors would be concerned their pension fund is financing a company tied to serious misuse of AI.
I think a lot of working people in Canada who are contributors to the CPP would be concerned to learn that the entity that invests their pension is investing in this company that has been responsible for such an egregious treatment of women and minors.
Chris Roberts, Canadian Labour Congress
Calls for divestment echo debates that have surrounded pension funds and contentious industries before, such as fossil fuels. Those debates highlight a tension between financial return objectives and public values for funds that manage retirement savings on behalf of millions.
Legal, regulatory and market context
Jan Mahrt-Smith, professor of sustainable finance at the Rotman School of Management, noted that federally regulated pension funds are not required to align investment choices with beneficiaries’ personal values. He said legal and fiduciary duties typically prioritise financial returns so long as investments are lawful.
You cannot overrule a financial investment thesis with ethical or moral concerns as long as the investment is legal.
Jan Mahrt-Smith, Rotman School of Management
xAI’s Grok Imagine feature, which allows users to upload images and ask the model to alter them, ignited scrutiny after examples surfaced showing requests to remove clothing or create sexualised images without consent. Some countries, including Malaysia and Indonesia, have blocked access to Grok, while the U.K. and other authorities have opened investigations.
xAI did not provide a detailed comment when contacted. An automated reply to media inquiries read, 'Legacy Media Lies.' Meanwhile, Elon Musk has warned users that anyone creating illegal content will face consequences comparable to uploading illegal material.
What CPP wants and what could change
CPP Investments has set out a list of measures it says must be adopted to maintain confidence in its financing. Key items it named are:
- Hard blocks at generation time for non-consensual sexualised imagery and anything involving minors
- Independent safety assessments of models and systems
- Transparency reporting on safety and misuse incidents
- Clear accountability between model teams and content moderation teams, with board-level oversight
- Formal incident response protocols
CPP Investments is independently managed from federal and provincial governments, and the federal Department of Finance said questions about specific investment decisions should be directed to the fund.
Why this matters to contributors
The controversy highlights a broader issue for public pensions: balancing long-term returns from emerging technologies with reputational and societal risks. Contributors who expect their retirement savings to be managed with attention to both financial and ethical implications are likely to watch how CPP Investments follows up on its stated conditions for xAI.
CPP Investments has signalled it will press for stronger controls, but it has not outlined thresholds for divestment. The coming months will show whether the fund’s oversight and the company’s safety changes are sufficient to ease concerns among contributors and regulators.
CPP InvestmentsxAIGrokElon MuskAI safetypension funds
