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Elon Musk-founded artificial intelligence company xAI has closed a $6 billion funding round at an $18 billion valuation, as investor enthusiasm for brand new challengers to OpenAI continues unabated.
Although xAI is simply a bit over a 12 months old, its funding catapults it into the richest league of potential competitors to Microsoft-backed OpenAI, which has secured greater than $13 billion in funding. In terms of capital raised, xAI now ranks alongside Anthropic, which has raised greater than $8 billion since its founding in 2021.
Musk co-founded OpenAI before parting ways with its CEO Sam Altman in 2018.
Investors in xAI's latest round include a lot of Musk's most loyal backers, including Kingdom Holding, the Saudi investor led by Prince Alwaleed Bin Talal, Valor Equity Partners and Dubai-based Vy Capital, in addition to Silicon Valley firms Andreessen Horowitz and Sequoia Capital.
The same investors had previously backed Musk's $44 billion acquisition of Twitter in 2022. The AI startup's chatbot Grok is tightly integrated with Musk's social media platform, now called X, giving it access to a real-time data stream and a big audience of potential users.
Providing the talent and computing power needed to construct large AI models comes at a high cost. Nvidia, the leading supplier of chips used to coach AI systems, reported a 262 percent jump in revenue last week as demand continues to outstrip supply of its latest processors. The world's most precious firms — including Microsoft, Google and Meta — are racing to expand their AI capabilities, investing billions in the information center infrastructure needed to construct and run those capabilities.
Still, investors still see opportunities for brand new entrants and alternative approaches to constructing large language models, the AI systems that power Grok and ChatGPT. The xAI deal comes as Paris-based Mistral, founded a 12 months ago, is near raising a brand new €500 million round of funding at a €5 billion valuation, people conversant in the talks said.
The deal gives xAI a post-money valuation of $24 billion when the brand new investment is taken under consideration.
The company said it had made “significant progress” in a brief time frame, including adding image processing capabilities to the version of Grok released in November.
“xAI will proceed this steep progression in the approaching months and can shortly announce several exciting technology updates and products,” it said in a blog entry late Sunday night in California. “The funds from the round will probably be used to bring xAI's first products to market, construct advanced infrastructure, and speed up research and development of future technologies.”
And further: “The company’s mission is to know the true nature of the universe.”
Musk has touted Grok as a substitute “seeking maximum truth” to competitors ChatGPT and Google Gemini, which he describes as “politically correct.”
During the fundraising, backers of Musk's other ventures, including X and SpaceX, got first refusal to back xAI, people conversant in the talks told the Financial Times last week.
According to 1 participant, investors who raised questions on problems at Musk's other ventures were excluded from the xAI funding round.
The FT first reported in January that xAI was in talks to lift as much as $6 billion. At the time, Musk said in a post on X: “xAI shouldn’t be raising capital and I actually have not spoken to anyone about it.”
