Elon Musk’s latest venture, xAI, a direct competitor to the AI sensation OpenAI, has reportedly secured an impressive $6 billion in funding. This latest funding round values the company at $18 billion, showcasing the immense potential investors see in Musk’s AI ambitions. According to reliable sources close to the deal, the investment is poised to close in the next few weeks, unless there are any last-minute changes in the terms.
Negotiations for this funding have been dynamic, with the terms undergoing revisions. Initially, Musk’s right-hand man, Jared Birchall, presented a fundraising goal of $3 billion at a $15 billion pre-money valuation. However, the surge of interest from potential investors prompted a swift adjustment to the terms. As one source close to the deal revealed, ”We received an email stating that the funding target had increased to $6 billion at an $18 billion valuation. We were advised not to complain as there were many other investors eager to participate.”
Notably, prominent investors Sequoia Capital and Future Ventures, co-founded by Musk’s long-time friend Steve Jurvetson, are actively participating in this funding round. Other potential participants include Valor Equity Partners and Gigafund, whose founders share close ties with Musk. This interwoven network exemplifies Musk’s tendency to merge his personal and business relationships.
Jurvetson holds a seat on SpaceX’s board and was previously a director at Tesla. Gigafund’s founder, Luke Nosek, who co-founded Founders Fund with investor Peter Thiel, made the initial investment in SpaceX and has remained on its board since. Antonio Gracias, the founder of Valor, was an early investor in Tesla and, like Jurvetson, served as a former Tesla director and currently sits on SpaceX’s board.
The source close to the deal indicated that the full list of investors may not be entirely clear due to the unique way commitments were gathered. ”It involved Zoom calls where you’re essentially just talking to Elon and Jared on the other side of the table, along with some engineers,” the source explained.
xAI’s marketing literature boldly proclaims its goal of bridging the gap between the digital and physical realms. However, it remains underappreciated that Musk intends to achieve this by leveraging data from his vast network of companies, including Tesla, SpaceX, The Boring Company, and Neuralink.
X, Musk’s social media platform, has already incorporated xAI’s Grok chatbot as a paid add-on. This represents a mere fragment of Musk’s ambitious vision, which envisions a sprawling virtual cycle. Grok serves as both a client for X and a recipient of its massive distribution. Musk’s plan is for Grok to eventually harness data from his other companies, empowering it to navigate the physical world in countless ways, starting with the development of truly autonomous vehicles.
Another potential beneficiary of xAI’s advancement is Tesla’s humanoid robot, Optimus. While Optimus is still in its developmental stages, Musk confidently stated during a recent earnings call that it would be capable of performing tasks in Tesla factories by the end of the year. Even if this timeline proves to be overly optimistic, xAI’s sophisticated technology could accelerate the capabilities of these robots beyond previous expectations.
In the immediate term, X itself stands to gain the most from xAI’s growing momentum. Despite becoming a breeding ground for toxicity since Musk’s acquisition, X has retained a stake in xAI, allowing it to reap the benefits of its growth.
Musk’s rivalry with OpenAI has been simmering since the latter’s meteoric rise began last year, shortly after the release of its popular ChatGPT chatbot. Musk was a co-founder of OpenAI in 2015 but later departed due to disagreements over the company’s direction. He has since publicly criticized OpenAI co-founder Sam Altman and mocked the brand, suggesting it should be renamed ”ClosedAI.” Last month, Musk released the architecture of xAI’s early chatbot, ”Grok-1,” as open source, allowing anyone to download and modify it. This move was part of Musk’s ongoing campaign to differentiate his efforts from OpenAI, which has kept its technology proprietary and is now facing a lawsuit from Musk.
