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Elon Musk's xAI has secured latest backing from Silicon Valley enterprise capital giants Andreessen Horowitz, Sequoia Capital and Tribe Capital because the tech billionaire closes a brand new funding round that values the bogus intelligence startup at $18 billion.
The trio of investors has committed to participating in xAI's latest funding round, with which Musk goals to boost nearly $6 billion, people acquainted with the negotiations say.
However, an investor involved within the round said that the Tesla and X boss continues to be “several hundred million dollars” in need of this goal.
Tribe and Sequoia declined to comment. Andreessen Horowitz and Musk didn’t reply to a request for comment.
The funding deal comes as Musk looks to secure the financial clout needed to meet up with market leaders OpenAI, Anthropic and Google, all of which have released more powerful generative AI models than xAI.
His pitch to investors is that xAI can gain traction due to its connection to the opposite firms he leads – which, as customers of the startup, could provide technology, data and early revenue.
The funding round would give xAI a so-called “post-money” valuation of $24 billion after accounting for the brand new investment and would help the startup develop latest versions of its Grok chatbot.
Musk co-founded OpenAI before leaving the corporate in 2018 after disagreements with CEO Sam Altman over the direction of research. Musk has since sued OpenAI and Altman, claiming they compromised the startup's original mission to develop AI systems for the good thing about humanity. OpenAI has dismissed this lawsuit as “frivolous.”
Musk has also promised to be more transparent than competitors like OpenAI in his pursuit of artificial general intelligence – the purpose at which machines have higher cognitive abilities than humans.
He has also committed to making a “maximum truth-seeking AI” and criticizes current models that he believes are trimmed for political correctness.
One investor said he was confident in Musk's offering but warned that xAI was lagging behind its competitors. “To catch up, you'll have to spend billions of dollars on H100 (chips) and infrastructure,” the person warned.
During the xAI fundraising, investors like Sequoia and Andreessen, who had previously backed Musk firms like Talks to accumulate 25 percent of the shares.
Another Silicon Valley investor added that much of the funding for the round was raised through banks and special purpose vehicles, including outside the United States.
Another investor involved within the round expressed concern that investors who raised questions on problems in Musk's other ventures were excluded from the xAI funding round.
“The team behind xAI is de facto good, so I’m not frightened about our investment, but I’m frightened in regards to the approach,” the person said. “It’s not inclusive, it’s not Silicon Valley.”
The Financial Times first reported in January that xAI was in talks to boost as much as $6 billion.
It had instructed Morgan Stanley to coordinate talks with potential investors all over the world, including sovereign wealth funds, family offices and personal investors within the Middle East and Hong Kong.
At the time, Musk said in a post on X: “xAI is just not raising capital and I even have not had any discussions with anyone about it.”
