Elon Musk closes $6 billion financing for OpenAI rival xAI

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Elon Musk’s artificial intelligence startup xAI has closed a $6 billion funding round at a valuation of $18 billion, as investor fervor for new rivals to OpenAI continues unabated.

Despite being just over a year old, xAI’s funding puts it in the richest tier of potential rivals to Microsoft-backed OpenAI, which has secured more than $13 billion in funding. Measured by capital raised, xAI now ranks alongside Anthropic, which has raised more than $8 billion since its inception in 2021.

Musk co-founded OpenAI before parting ways with CEO Sam Altman in 2018.

Investors in xAI’s new round include many 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, as well as companies of Silicon Valley Andreessen Horowitz and Sequoia Capital.

The same investors had previously backed Musk’s $44 billion acquisition of Twitter in 2022. Grok, the AI ​​startup’s chatbot, is tightly integrated with Musk’s social media platform, now called X, giving you access to a real-time data stream and a large audience. of potential users.

Assembling the talent and computing power needed to build great AI models comes at a high price. Nvidia, the dominant supplier of chips needed to train artificial intelligence systems, last week reported a 262 percent increase in revenue as demand continues to outstrip supply for its latest processors. The world’s most valuable companies, including Microsoft, Google and Meta, are racing to expand their AI capabilities and investing billions in the data center infrastructure needed to build and operate them.

However, investors still see opportunities for new entrants and alternative approaches to building large language models, the artificial intelligence systems that power Grok and ChatGPT. The deal with xAI comes as Paris-based Mistral, founded a year ago, approaches a new €500 million round at a €5 billion valuation, according to people familiar with the talks.

The deal gives xAI a post-money valuation of $24 billion once new investment is taken into account.

The company said it had “made significant progress” in a short time, including adding imaging capabilities to Grok, which launched in November.

“xAI will continue on this steep trajectory of progress over the coming months, with multiple technology updates and exciting products soon to be announced,” he said in a blog post late Sunday in California. “Funds from the round will be used to bring xAI’s first products to market, build advanced infrastructure, and accelerate research and development of future technologies.”

He added: “The company’s mission is to understand the true nature of the universe.”

Musk has presented Grok as an “ultimate truth-seeking” alternative to what he has tried to portray as “politically correct” rivals ChatGPT and Google’s Gemini.

During his fundraising, backers of Musk’s other companies, including X and SpaceX, were given preference to back xAI, people familiar with the conversations told the Financial Times last week.

Investors who had raised questions about problems at Musk’s other companies had been excluded from xAI’s funding round, according to a person who participated.

The Financial Times first reported in January that xAI was in talks to raise up to $6 billion. At the time, Musk said in a post on X: “xAI is not raising capital and I haven’t had conversations with anyone about it.”

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