Elon Musk’s AI startup, xAI, has successfully raised $6 billion in a new funding round, positioning itself to aggressively compete with major players in the AI industry, including OpenAI, Microsoft, and Alphabet. The funding round saw participation from prominent investors such as Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital, Fidelity, Prince Alwaleed Bin Talal, and Kingdom Holding. This substantial financial boost underscores xAI’s ambitious plans to scale its operations and enhance its technological capabilities.
The successful funding round confirms earlier reports that xAI was seeking to raise $6 billion at a pre-money valuation of $18 billion. Notably, Musk has ensured that X, the social network he owns and controls, also holds a stake in xAI. This strategic move means that any success and growth experienced by xAI will directly benefit X, further intertwining Musk’s ventures and their financial outcomes.
Musk is no stranger to the AI space, having been one of its earliest and most prominent entrepreneurs. Under his leadership, Tesla has become the leading electric vehicle (EV) manufacturer, incorporating advanced self-driving technologies. Additionally, Musk co-founded OpenAI, where he invested tens of millions of dollars. However, his relationship with OpenAI has soured over time. In March, Musk sued OpenAI and its co-founder Sam Altman, accusing them of betraying OpenAI’s mission and becoming a “closed-source de facto subsidiary” of Microsoft. Musk has also publicly criticized Google, accusing the tech giant of embedding bias into its AI products.
In response to these industry dynamics, Musk formed xAI last year and subsequently released the Grok 1.0 model, a chatbot designed to rival ChatGPT, in November. The Grok model was initially made available to Premium+ users on X, who pay $16 a month. In April, xAI introduced the Grok 1.5 model, expanding access to Premium users on X. The company also showcased Grok’s multimodal capabilities, highlighting its potential to handle various types of data inputs. Earlier this year, xAI open-sourced the Grok model, though it did so without providing the training code.
With the new influx of funds, xAI plans to bring its first set of products to market, build advanced infrastructure, and accelerate the research and development of future technologies. The company has indicated that it is likely to seek partnerships to expand Grok’s user base beyond X, aiming to broaden its impact and reach.
xAI’s new backers include individuals with whom Musk has close ties, such as Ken Howery, a co-founder of PayPal and Founders Fund. The company claims it aims to develop “truthful” AI systems, although, like other AI chatbots, Grok has faced issues with generating misleading information, particularly in its news summary feature on X.
This significant funding round not only bolsters xAI’s financial standing but also signals the company’s readiness to scale up and compete at the highest levels of the AI industry. By leveraging these resources, xAI aims to push the boundaries of AI technology and establish itself as a leader in developing innovative and reliable AI solutions.