Elon Musk’s xAI said it raised $6 billion in its latest fundraising round, as the OpenAI rival looks to invest more in research and development amid fierce competition in the burgeoning sector.
The funding round brings the valuation of the year-old startup to $24 billion, including the newly raised funds, making it the second-most valuable AI startup outside of OpenAI.
The money will be used to take “xAI’s first products to market, build advanced infrastructure and accelerate research and development of future technologies,” xAI said.
The round is double the initial target set by Musk’s team. Investors had been talking about raising $3 billion at an $18 billion valuation, including the new cash, The Wall Street Journal reported last month. Musk’s team raised the target in light of strong demand, according to people familiar with the matter.
Investors in the round include brand-name Silicon Valley firms such as Sequoia Capital and Andreessen Horowitz as well as Valor Equity Partners, Vy Capital, Fidelity Management & Research, and Saudi Prince al-Waleed bin Talal and Kingdom Holding, xAI said on its website late Sunday.
The latest round brings xAI’s fundraising total to at least $7 billion. Musk had personally invested $750 million into the startup, while his social-media company X contributed $250 million in the form of computing resources, some of the people said.
Musk tweeted in November that X investors will own 25% of xAI.
The total begins to rival OpenAI, which received $10 billion in committed funding from Microsoft last year, and Anthropic, another major AI startup that raised more than $6 billion last year. OpenAI is valued by investors at $86 billion, and Anthropic at $18 billion.
With xAI, Musk has been playing catch-up with his more well-funded rivals. He launched xAI publicly in July last year, 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. xAI introduced its latest AI model, called Grok-1.5, earlier this year.
Musk said on X Sunday that his AI startup was valued at $18 billion before the new cash.
Musk, who runs other startups in addition to Tesla and SpaceX, has maintained loyalty among some investors despite recent turbulence in parts of his business empire.
Shares in Tesla have fallen more than 50% from its peak in November 2021, and the valuation of X has declined by more than half since he bought it in late 2022.
One selling point for xAI, according to its investors, is Musk’s other businesses, which collect valuable data that could be used to train the startup’s AI models and give it a leg up over competitors.
Musk is using X data to train Grok, which is delivering news summaries for the Stories feature on X. In the future, Musk could also use visual data from Tesla cars for model training and integrate xAI’s technology into Tesla’s Optimus humanoid robot, investors say.
Musk has talked publicly about both the need for massive amounts of data to train models and the amount of data that Tesla collects.
“The two sources of unlimited data are synthetic data and real world video,” he said during an interview on X Spaces last month. “Tesla has a pretty big advantage in real-world video.”
Last year, Musk also partnered with the cloud giant Oracle, whose data centers house the computing chips used to train Grok. Oracle founder Larry Ellison is a friend of Musk’s and has been involved for some time in helping Musk secure the computing resources needed to kick-start xAI.
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