Elon Musk’s xAI Secures $500 Million Toward $1 Billion Goal, Targets $15-$20 Billion Valuation

Elon Musk’s artificial intelligence venture, xAI, has successfully attracted $500 million in commitments from investors, marking a significant step towards its ambitious $1 billion fundraising goal, according to sources familiar with the discussions. The company is currently in talks to establish a valuation ranging between $15 billion to $20 billion, although terms are subject to potential adjustments in the upcoming weeks.

Launched by Musk in the previous year, xAI stands as an alternative to Open AI, a venture he co-founded but eventually parted ways with due to philosophical disparities regarding the monetization of technology. Musk’s latest venture introduces a chatbot named Grok, developed using social media posts from X, the network formerly known as Twitter, which Musk also owns. This unique approach allows Grok to access more recent data for its responses compared to other chatbots.

Investors in xAI are anticipated to have some overlap with those who supported Musk’s notable $44 billion takeover of Twitter. Notable backers of the Twitter deal include Larry Ellison, Sequoia Capital, Andreessen Horowitz, Fidelity Management & Research Co., and Saudi Prince Alwaleed bin Talal.

In November, Musk disclosed that equity investors in X would hold a 25% stake in xAI. This arrangement practically invites those investors to contribute at least 25% of their X investment amount to xAI. For instance, if an investor committed $10 billion to X, they would be invited to invest $2.5 billion or more in xAI.

Finalization of terms between Musk and investors is expected in the coming weeks, with both parties actively engaged in discussions. Some stakeholders are exploring the possibility of obtaining computing power alongside or instead of xAI equity shares. This could prove beneficial for venture firms’ portfolio companies, especially those requiring intensive data processing for the development of new artificial intelligence products. The evolving landscape of xAI’s funding and its strategic approach to data utilization continue to draw attention in the ever-evolving AI industry.