xAI, Elon Musk’s AI venture, is set to raise $6 billion

xAI, Elon Musk’s AI venture and a rival to OpenAI, is set to raise $6 billion at an $18 billion pre-money valuation, a trusted source familiar with the deal reports. This funding round would give investors a 25% stake in the company, with the deal expected to finalize in the coming weeks unless the terms are modified.

Initially, xAI aimed to raise $3 billion at a $15 billion valuation, but due to high investor demand, these figures were swiftly revised upward. Jared Birchall, who manages Musk’s family office, communicated the updated terms to potential investors last weekend.

Our source shared, “We received an email stating, ‘It’s now $6B on $18B, and don’t complain because many others want in too.'”

Sequoia Capital and Future Ventures, co-founded by Musk’s long-term associate Steve Jurvetson, are among the investors. Others likely to join include Valor Equity Partners and Gigafund, closely linked to Musk’s network. Attempts to contact these participants have received no response; xAI does not have a dedicated press function.

Jurvetson, a board member at SpaceX and former Tesla director, along with Gigafund co-founder Luke Nosek, an early SpaceX investor and board member, and Valor founder Antonio Gracias, a Tesla early backer and former board member, are all part of this elite investor circle.

The exact composition of investors is somewhat opaque due to the private nature of their commitments, which were often made in one-on-one Zoom calls involving Musk, Birchall, and potential investors.

The pitch is reportedly quite compelling. xAI’s marketing documents express the company’s goal to bridge the digital with the physical, leveraging training data from Musk’s diverse ventures like Tesla, SpaceX, The Boring Company, and Neuralink.

Moreover, Musk’s social media platform, X, which has integrated xAI’s recent chatbot Grok as a paid feature, stands to benefit significantly from xAI’s advancements. According to Musk, Grok will eventually utilize data from all his businesses, aiding developments such as autonomous vehicles.

Tesla’s humanoid robot, Optimus, might also advance faster than anticipated through Musk’s integrated strategy. Although still in development, Musk has plans for Optimus to start operating in Tesla factories by year’s end.

As for X, despite its struggles since Musk’s acquisition, it retains a stake in xAI, positioning it to gain from any future successes of the AI firm.

This expansion puts OpenAI, co-founded by Musk and now led by Sam Altman, in a precarious position. Musk, who left OpenAI’s board in 2018 over strategic disagreements, has been openly critical of the company, even suggesting it be renamed ‘ClosedAI’ due to its proprietary approach. Last month, Musk made headlines by open-sourcing xAI’s initial chatbot architecture, highlighting his contrasting open-access philosophy to AI development.

Source: https://techcrunch.com/2024/04/25/xai-elon-musks-openai-rival-is-closing-on-6b-in-funding-and-x-his-social-network-is-already-one-of-its-shareholders/