Elon Musk’s xAI gets new backing from Andreessen, Lightspeed, Sequoia and Tribe

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Elon Musk’s xAI has secured fresh backing from Silicon Valley venture capital giants Lightspeed Venture Partners, Andreessen Horowitz, Sequoia Capital and Tribe Capital, as the tech billionaire closes in on a new funding round that values ​​the startup of artificial intelligence at 18 billion dollars.

Investors have pledged to join xAI’s latest financing in which Musk seeks to raise nearly $6 billion, according to people familiar with the negotiations.

However, one investor involved in the round said the Tesla and X boss is still “a few hundred million dollars” short of that goal.

Lightspeed, Tribe and Sequoia declined to comment. Andreessen Horowitz and Musk did not respond to a request for comment.

The funding deal comes as Musk looks to secure the financial firepower to catch up with market leaders OpenAI, Anthropic and Google, all of which have released generative AI models more powerful than xAI.

Its pitch to investors is that xAI can gain traction thanks to its connection to other companies it runs, which could provide technology, data and initial revenue as customers of the new company.

The funding round would give xAI a post-money valuation of $24 billion once the new investment is taken into account, and would help the startup develop new versions of its Grok chatbot.

Musk co-founded OpenAI before leaving in 2018 following disagreements with CEO Sam Altman over the direction of research. Musk has since sued OpenAI and Altman, alleging that they had compromised the startup’s original mission of building artificial intelligence systems for the benefit of humanity, a lawsuit that OpenAI has dismissed as “frivolous.”

Musk has also promised to be more transparent in his pursuit of artificial general intelligence (the point at which machines have greater cognitive abilities than humans) than rivals such as OpenAI.

He has also pledged to build an “AI that seeks the maximum truth,” criticizing current models that, in his opinion, have been trained to be politically correct.

One investor said he was persuaded by Musk’s speech, but warned that xAI is “behind” its rivals. “To catch up requires spending billions of dollars on H100 (chips) and infrastructure,” the person warned.

During xAI’s fundraising, investors including Sequoia and Andreessen, who had previously backed Musk’s businesses including X and SpaceX, were given preference to back the AI ​​company and acquire up to 25 percent of the shares, according to people familiar. with the agreement. talks.

Another Silicon Valley investor added that much of the funding round had been raised through banks and special purpose entities, including outside the United States.

Another investor who participated in the round said he was concerned that investors who had raised questions about issues at Musk’s other companies had been excluded from xAI’s funding round.

“The team behind xAI is really good, so I’m not worried about our investment, but I am worried about the approach,” the person said. “It’s not inclusive, it’s not Silicon Valley.”

The Financial Times first reported in January that xAI was in talks to raise up to $6 billion.

He had ordered Morgan Stanley to coordinate talks with potential investors around the world, including sovereign wealth funds, family offices and retail investors in the Middle East and Hong Kong.

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.”

Additional reporting by Maria Heeter in New York and Ivan Levingston in London

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