Investors in Talks to Help Elon Musk’s xAI Raise $3 Billion, Adding to Industry Arms Race
Funding round could value the artificial-intelligence startup at $18 billion, though details aren’t finalized
Investors close to Elon Musk are in talks to help xAI raise $3 billion in a round that would value the tycoon’s artificial-intelligence startup at $18 billion, people familiar with the matter said.
The venture-capital firm Gigafund and Steve Jurvetson, a prominent Musk backer and co-founder of another venture firm, are among the backers considering investing in the round, the people said.
Jurvetson is a longtime Musk friend who sits on the board of his rocket company, SpaceX, and was a director at Tesla until 2020. Gigafund was co-founded by Luke Nosek, also a SpaceX director, who like Musk is a member of the “PayPal mafia” group that started the payments company. Musk and Nosek together once tried to buy DeepMind, the AI company that is now part of Google.
Terms of the xAI fundraising haven’t been finalized and the plans could change.
The proposed fundraising marks another escalation in the artificial-intelligence arms race. Leading AI startups have raised billions of dollars in recent years to fund the computing resources needed to train advanced large language models, the technology powering generative AI chatbots.
ChatGPT-creator OpenAI has secured $13 billion in committed funding from Microsoft, while its rival, Anthropic, raised over $6 billion.
With xAI, Musk has been playing catch-up with his more well-funded rivals. He launched xAI publicly in July, making some investors skeptical that it has enough time to compete with other leading AI firms. The startup released its chatbot, Grok, in November and made it available to subscribers on his social-media platform, X. Last month, xAI introduced its latest AI model, called Grok-1.5, and said it would soon be available to early testers and existing Grok users.
A December securities filing showed that xAI was looking to raise $1 billion and had already secured nearly $135 million from four investors. It couldn’t be determined if that fundraising is a part of the current negotiations.
Musk has denied previous reports that he is raising additional money for xAI. “xAI is not raising capital and I have had no conversations with anyone in this regard,” he posted on X in late January.
He and representatives for xAI and X didn’t respond to requests for comment on Friday.
The current fundraising talks have gathered momentum recently, the people familiar with the matter said.
Some parties in the current financing conversations are discussing raising special investment funds that would pool money from other investors rather than relying solely on money from a couple major venture firms, the people said.
A cash infusion could help xAI attract top AI engineers in what has become the most competitive job market in Silicon Valley. Since founding xAI, Musk has been engaged in a fierce recruiting war to poach talent from other leading AI companies, including Google’s DeepMind, OpenAI and his own Tesla. Earlier this week, Musk said he also had to boost AI engineering pay at the electric-car company to ward off poaching from the likes of OpenAI.
Musk co-founded OpenAI as a nonprofit research lab in 2015 with its current CEO, Sam Altman, but left that company several years later after a dispute over control. Tensions between the two men spilled into the open recently when Musk sued OpenAI and Altman, alleging that they had abandoned OpenAI’s initial mission in pursuit of profit.
Since xAI’s founding, Musk has intertwined it with X. The artificial-intelligence startup has privileged access to X’s trove of posts to train its models, and its employees have at times been working out of the longtime Twitter headquarters building in downtown San Francisco. Musk tweeted last fall that X Corp. investors will own 25% of xAI.