Elon Musk’s artificial intelligence venture, xAI, has successfully secured commitments totaling $500 million from investors, marking a significant step towards its ambitious $1 billion funding goal, as disclosed by individuals familiar with the ongoing discussions. While the company is contemplating a valuation in the range of $15 billion to $20 billion, it’s worth noting that terms may undergo adjustments in the following weeks, caution the insiders who preferred to remain anonymous due to lack of authorization to speak publicly about the investment. Musk, reacting to the news on the platform formerly known as Twitter (now X), dismissed the reports as “fake news.”
Founded by Musk last year as an alternative to Open AI, a company he co-founded but later parted ways with due to philosophical differences on profit models, xAI has introduced a unique product named Grok. This chatbot utilizes data derived from social media posts on X, a platform also owned by Musk, providing Grok with access to more up-to-date information compared to other chatbots.
Discover More: Elon Musk’s Grok Represents a Serious Threat to ChatGPT
Notably, there is a likelihood of overlapping investors between the two companies. Individuals who supported Musk’s $44 billion acquisition of Twitter include notable names such as Larry Ellison, Sequoia Capital, Andreessen Horowitz, Fidelity Management & Research Co., and Saudi Prince Alwaleed bin Talal.
In November, Musk revealed that equity investors in X would hold a 25% stake in xAI. Practically, this means these investors are extended an invitation to invest a minimum of 25% of the amount they invested in X into xAI. For instance, if they invested $10 billion in X, they are encouraged to invest $2.5 billion or more in xAI. Finalization of terms between Musk and investors is expected in the coming weeks.
Sources indicate that certain parties are exploring the possibility of obtaining computing power in addition to, or in some instances, instead of xAI equity shares. This alternative approach could prove advantageous for venture firms’ portfolio companies, particularly those requiring intensive data processing for the development of new artificial intelligence products.
