Musk’s xAI Is Close to Raising $6 Billion from Sequoia, Others
Elon’s Musk xAI is close to having billions of dollars more in its coffers to make its chatbot Grok a more fearsome competitor to OpenAI’s ChatGPT.
Musk’s year-old startup is raising $6 billion at a valuation of $18 billion not including the investment, according to two people close to the deal. Sequoia Capital is one of the investors participating in the xAI round, according to one of the people, and it’s expected to close in the next two weeks, said the second. The round represents one of the largest single hauls among the startups competing to develop technology that writes, talks and creates art like humans, a category that includes OpenAI and Anthropic.
The Takeaway
• xAI is raising $6 billion at a valuation of $18 billion
• Sequoia is one of the investors
• The new money will help xAI develop its chatbot Grok
The new round is double the size of the funding figures xAI was discussing with investors earlier this year. The round’s backer and timing haven’t been previously reported. The Wall Street Journal and Financial Times previously reported on the funding talks.
The new investment adds to xAI’s warchest. In December, the company disclosed plans to raise $1 billion in a separate round primarily backed by Musk, people close to the company previously said.
Musk launched xAI in early 2023, and it released its chatbot Grok to premium subscribers on Musk’s social network X in December. The company is currently training the second generation of Grok on 20,000 Nvidia H100s, the chips that the most advanced AI models operate on, according to Musk. He said on Twitter Spaces this month that they ultimately need 100,000 GPUs to train Grok 3.0. xAI has also been focused on hiring engineers, poaching several top engineers from Tesla over the past few months, as The Information previously reported.
The new funding also shows that investors are willing to spread their bets among competitors in the sector, where valuations have skyrocketed. Sequoia Capital, for instance, started investing in OpenAI in 2021 and bought shares at a $20 billion valuation, but didn’t invest in the latest $86 billion tender offer, which valued the company at about 54 times its annualized revenue as of December. Sequoia is also an investor in Musk’s SpaceX and helped finance Musk’s $44 billion buyout of Twitter, now called X.
It’s not clear which other investors are participating in the latest xAI round. In the past, Valor Equity Partners and Vy Capital have been among those that backed Musk’s ventures. Valor, led by Antonio Gracias, was one of the first investors into Tesla and SpaceX, and Vy Capital invested in Musk’s Twitter purchase.