Elon Musk’s AI startup, xAI, has successfully secured $6 billion in a Series B funding round, it is one of the largest venture capital raises in history. The announcement was made on Sunday with xAI outlining plans to use the capital infusion to compete against leading AI firms such as OpenAI, Microsoft, and Alphabet.
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xAI has raised $6 billion in its latest Series B funding round. The funding round included investors such as Andreessen Horowitz, Sequoia Capital, Fidelity, Valor Equity Partners, Vy Capital, and Saudi Arabian Prince Alwaleed Bin Talal.
The funding has pushed the company’s valuation to $24 billion, up from a pre-money valuation of $18 billion.
xAI was founded by Elon Musk in the summer of 2023. The startup focuses on developing advanced AI systems with an emphasis on truthfulness, competence, and maximum benefit for humanity. xAI’s mission includes understanding the true nature of the universe, according to the company’s statement.
xAI has launched its first major product, Grok, a large language model (LLM) similar to OpenAI’s GPT-4, Anthropic’s Claude and Meta’s LLaMA.
Grok is currently accessible to premium users of X, the social media platform formerly known as Twitter, which Musk acquired for $44 billion.
The chatbot Grok is marketed as an edgier version of OpenAI’s ChatGPT with Musk planning to integrate it deeply into the X platform.
xAI plans to build a supercomputer to power an upgraded version of Grok. This supercomputer will require approximately 100,000 of Nvidia’s H100 chips.
Nvidia’s Blackwell B200 AI graphics cards, which are essential for such high-performance computing, cost between $30,000 to $40,000 each. The goal is to have the new data center operational by the fall of 2025.
The fundraising marks a milestone especially for a company that was launched less than a year ago. Musk had denied reports that xAI was seeking $6 billion, as reported by The Financial Times, although the announcement confirms this amount.
Microsoft has invested around $13 billion in OpenAI, establishing a huge stake in the AI research group responsible for ChatGPT. Amazon announced a $4 billion investment in Anthropic AI.
The Series B funding round saw contributions from investors including:
- Valor Equity Partners
- Vy Capital
- Andreessen Horowitz (a16z)
- Sequoia Capital
- Fidelity Management & Research
- Prince Alwaleed Bin Talal
- Kingdom Holding
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Prior to this funding round, xAI’s pre-money valuation was pegged at $18 billion, a figure confirmed by Musk via a post on X (formerly Twitter) on May 27, 2024. The new infusion of capital boosts xAI’s valuation to an estimated $24 billion.
Elon Musk has a long history of involvement in AI development. He co-founded OpenAI, investing tens of millions of dollars in the venture.
In March 2024, Musk filed a lawsuit against OpenAI and its co-founder Sam Altman, accusing them of straying from their original mission of creating open-source AI to benefit humanity, and instead becoming a “closed-source de facto subsidiary” of Microsoft.
Elon Musk has been vocal about his concerns regarding AI bias, accusing companies like Google of embedding political biases into their AI products.
Since its formation in April 2023, xAI has made strides in AI development. The company launched its first chatbot model, Grok 1.0, in November 2023.
This model was later made available to Premium+ users on X, who subscribe for $16 per month. In April 2024, xAI released Grok 1.5, expanding access to all Premium users on the platform.
xAI open-sourced the Grok model earlier this year, though it did not release the training code. The company has also previewed Grok’s multimodal capabilities.
Musk has hinted at the construction of a massive new supercomputer referred to as the “Gigafactory of compute,” potentially in collaboration with Oracle.
xAI is actively seeking partnerships to expand the reach of Grok and other AI products beyond the X platform.
Grok’s news summary feature has faced criticism for generating misleading information, a common challenge among AI chatbots.
The Series B funding round attracted institutional investors and also individuals with close ties to Musk, including Ken Howery, a co-founder of PayPal and Founders Fund.
Musk faces challenges on multiple fronts. Recently, proxy advisory firm Glass Lewis recommended that Tesla shareholders reject Musk’s $56 billion pay package, citing its “excessive size” and negative impact on smaller shareholders.
The advisory firm also highlighted Musk’s numerous time-consuming projects outside of Tesla including his roles at SpaceX, the Boring Company, Neuralink, and X.
Tesla shareholders are scheduled to vote on the pay package on June 13, following a Delaware judge’s decision earlier this year to nullify the original 2018 compensation plan.
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