xAI, Elon Musk’s 10-month-old competitor to AI phenomenon OpenAI, is raising $6 billion at a pre-money valuation of $18 billion, according to a trusted source close to the deal. The deal – which would give investors a quarter of the company – is expected to close in the next few weeks unless the terms of the deal change.
The terms of the contract have already changed once. Last weekend, Musk’s right-hand man, Jared Birchall, told potential investors that xAI was raising $3 billion at a pre-money valuation of $15 billion. Given the large number of investors pushing for the deal, these numbers were quickly adjusted.
Our source says: “We all got an email that basically said, ‘It’s now $6 billion at $18 billion, and don’t complain because a lot of other people want in.’ “
The terms of the contract have already changed once. Last weekend, Musk’s right-hand man, Jared Birchall, told potential investors that xAI was raising $3 billion at a pre-money valuation of $15 billion. Given the large number of investors backing the deal, these numbers were quickly adjusted.
Our source says: “We all got an email that basically said, ‘It’s now $6 billion at $18 billion, and don’t complain because a lot of other people want in.’ “
This hardly bothered investors who had been campaigning for months to complete the deal. Participating in the round are Sequoia Capital and Future Ventures, the venture fund co-founded by Musk’s longtime friend Steve Jurvetson.
Other participants are likely to include Valor Equity Partners and Gigafund, whose founders also belong to Musk’s inner circle, which is known to combine the personal and the private. (These investors were not contacted; xAI does not have a press function.)
Jurvetson sits on the board of SpaceX and was also a director at Tesla for a long time. Gigafund founder Luke Nosek, who previously co-founded Founders Fund with investor Peter Thiel, was the first venture investor to write a check to SpaceX and has sat on the board ever since. Valor founder Antonio Gracias was among the first investors in Tesla; Like Jurveston, he is a former Tesla director and is also on the board of SpaceX.)
Our source said that because of the way the commitments were obtained, it was not entirely clear to every other investor who was involved in the deal. “It’s a Zoom call and it’s just you and Elon and Jared [on the other side] at a table with some engineers.”
The tone, this person says, is captivating.
xAI’s marketing literature already indicates that the company’s goal is to connect the digital and physical worlds. However, it may not be widely known that Musk wants to achieve this by incorporating data from each of his companies, which include Tesla, SpaceX, his tunneling companies, the Boring Company, and Neuralink, which develops computer interfaces that can be implanted into human brains .
Another of Musk’s companies is, of course, X. The social media platform has already integrated xAI’s months-old chatbot, Grok, into the platform as a paid add-on.
It’s just part of what Musk is telling investors: It’s going to become an extended virtual cycle. For example, at Grok, X is both a customer and a major distributor for Grok. At some point (says the pitch), Grok will be fed data from Musk’s other companies that will help him master the physical world in potentially endless ways, starting with truly self-driving cars.
Another likely beneficiary would be Tesla’s humanoid robot Optimus. Today, the Tesla robot is still in the lab, but Musk told analysts in a call earlier this week that Optimus will be able to perform tasks in Tesla’s factories by the end of this year. Even if that timeline proves ambitious, these skilled assistants may be able to do more — and more quickly than previously thought — if Musk’s overarching vision is put into action.
Meanwhile, X itself could be the most immediate beneficiary of xAI’s burgeoning momentum. Although the platform has become something of a toxic cesspool in the year and a half since Musk bought it and has subsequently lost a lot of value, Musk had already made sure that looks.
Musk has had his sights set on OpenAI since the company’s rise began in earnest early last year, shortly after it released its popular ChatGPT chatbot.
Musk co-founded OpenAI in 2015, later leaving behind disagreements over the direction of the company, which initially began as a nonprofit and later evolved into a for-profit organization. Since then, Musk has publicly addressed OpenAI co-founder Sam Altman, mocking the brand and suggesting he should call it himself instead ClosedAI.
When Musk open-sourced the architecture of xAI’s earliest chatbot, Grok-1, last month, meaning anyone can now download and modify it, the move was another part of his ongoing campaign to promote his efforts to distinguish it from OpenAI, which has not shared its secret sauce architecture with the world, and which Musk is now suing.
As first reported today in The Information, Musk said publicly this month that xAI is currently training the second generation of Grok on 20,000 Nvidia H100s, the chips that currently power the most advanced AI models.