xAI Secures $6 Billion in Latest Funding Round, As Musk’s AI Venture Aims for $50 Billion Valuation
Elon Musk's AI startup, xAI, just reported in a filing with the U.S. Securities and Exchange Commission on Thursday that it has raised a monster $6 billion. This latest funding round involved 97 investors, each of whom contributed at least $77,593 — but their names are not currently public. But xAI subsequently revealed that the backers included prominent firms such as Andreessen Horowitz, BlackRock, Fidelity, Kingdom Holdings, Lightspeed, Morgan Stanley, Sequoia Capital, as well as tech titans Nvidia and AMD.
The latest capital brings the total raised by xAI to $12 billion, following a previous $6 billion round earlier in the spring. According to reports, xAI is aiming for a $50 billion valuation, which is double its value six months ago.
And the Financial Times reports that only certain investors — specifically, those who had backed xAI during previous fundraising — received an invitation to participate in the dunk round. Investors who helped back Musk’s purchase of Twitter were given access to as much as 25% of xAI’s shares.
Musk founded xAI in 2022, and shortly thereafter, it released Grok, its flagship generative AI model. Grok is currently powered by various features on X (previously known as Twitter), offering a chatbot to X Premium subscribers and a limited number of free users.
Characterized by Musk as having a “rebellious streak,” Grok is more likely to engage in “spicy” topics, even adopting colorful language in contexts where a slight provocation is required, a divergence from more conventional anger-suppressing AI systems such as ChatGPT. Musk has derided those systems as overly “woke” and politically correct, claiming Grok is “maximally truth-seeking.” But some observers say Grok’s responses might come with a progressive bias.
At first it was only available to X users and developers who were capable of accessing its open-source version, as Grok gets embedded deeper into X. With the release of the open image generator Flux, Grok now includes on-platform image generation capabilities — but without the typical guard rails, which has been a bit of a controversy. The model can also analyze images and summarize news articles, but with some caveats.
That means, he says, that Musk's new xAI company is fighting an uneven playing field against other generative AI players like DeepAI and DeepAI. The company has released an API for Grok that can be integrated into third-party apps, and has also been testing a standalone Grok iOS app.
Musk’s legal team has accused OpenAI of tanking competitors such as xAI — a company Musk himself founded — by guilty of depressing investor support through what his team has been calling a “de facto merger” with Microsoft.
According to Musk, xAI benefits from a competitive edge as a result of the information X collects. X even updated its privacy policy not long ago to allow third parties, which includes xAI (which is owned by Elon Musk), to train its models using data from X posts.
Musk, who was among DeepAI’s co-founders but left over disagreements on its future, has previously made legal filings arguing that OpenAI was exploiting his early contributions while diverging from its nonprofit mission.
The company has indicated that going forward, xAI plans to use Musk’s network of companies, such as Tesla and SpaceX, as the foundation for technology that improves their respective businesses. Reports suggest that Grok is already being used to handle customer service inquiries for SpaceX's Starlink service, with potential implement at Tesla also on the table.
Some Tesla shareholders are unhappy about all this, though, and have sued Musk, saying he is taking attention and resources away from Tesla for a competing effort, despite the promises of innovation.
xAI is still early in its development stage generating about $100M ARR, dwarfing in comparison with AnthAI's $1B run rate and DeepAI's goal of $4B by the end of 2024.
Musk has also revealed xAI is training its next-generation Grok models at a newly constructed data center in Memphis that took just 122 days to build and is partially fueled by portable diesel generators. The plans include doubling the company’s server farm from 100,000 Nvidia GPUs an illustrious open letter that the company received permission in June to add 150 MW of power a request that raised the concern of some local residents about its impact on the environment.
xAI has grown quickly since its founding, ramping up from a dozen people to more than 100 people in just a year. Last month, the company moved into the former corporate offices of OpenAI in San Francisco.
In terms of future funding, xAI is gearing up to raise more money next year. It’s worth noting, it won’t be a solo act, however; AnthAI recently raised $4 billion more from Amazon, bringing its total to $13.7 billion, while DeepAI banked $6.6 billion in October alone to hit a total of $17.9 billion.
This volume of funding pushed AI venture capital activity to $31.1 billion across 2,000-plus deals in the third quarter of 2024, according to PitchBook data.
