Elon Musk’s xAI Secures $6 Billion in Funding, with Social Network X as a Shareholder

Elon Musk’s xAI, a rival to OpenAI, has secured $6 billion in funding with a preliminary valuation of $18 billion, according to TechCrunch, citing informed sources.

Investors are set to receive a quarter of the company’s shares. The deal is expected to close in the coming weeks, provided the terms remain unchanged.

However, the terms have been revised once before. Last week, Musk’s representatives informed potential investors of plans to raise $3 billion with a preliminary valuation of $15 billion. Due to high demand, these figures were quickly adjusted.

“We all received an email with the new terms: ‘$6 billion at $18 billion, and don’t complain, as many others want in on the deal,’” a source told TechCrunch.

Sequoia Capital, Future Ventures, Valor Equity Partners, and Gigafund will participate in the funding round. Founders of the latter three are part of Musk’s inner circle.

Steve Jurvetson of Future Ventures is a long-time friend of the billionaire. Luke Nosek of Gigafund was one of the early investors in SpaceX, while Valor’s founder Antonio Gracias invested in Tesla during its early stages.

According to the source, due to the way commitments are obtained, it is unclear who the other investors in the deal are.

“It’s a Zoom call, and it’s just you, Elon, and Jared [on the other side] at the table with a few engineers,” he added.

Musk to Gather Data for xAI from His Companies

Marketing materials for xAI state that the company’s goal is to connect the digital and physical worlds. To achieve this, Musk plans to gather training data from all his companies, including Tesla, SpaceX, Boring Company, and Neuralink.

One source is the social network X, which has already integrated xAI’s Grok chatbot into its paid subscription. However, this is just the beginning of a large-scale virtual cycle intended to help the AI model master the physical world, Musk stated.

X serves as a platform for Grok. The chatbot, in turn, will receive data from Musk’s other companies to enhance its capabilities for interacting with the physical world. This could be useful, for example, in creating fully autonomous Tesla vehicles.

Another potential beneficiary of xAI could be the humanoid robot Tesla Optimus. The billionaire hopes to deploy it in his factories this year.

For now, the immediate benefit will go to X itself, which has significantly depreciated since Musk’s acquisition a year and a half ago. Nevertheless, the company already holds a stake in xAI, allowing the social network to benefit from the AI startup.

xAI: A Direct Competitor to OpenAI

Musk makes no secret of the fact that xAI is intended to directly compete with OpenAI. Last year, it became the fastest-growing company in history thanks to the release of the ChatGPT chatbot.

Musk was one of the co-founders of OpenAI in 2015 but left the board in 2018 due to disagreements over its commercialization. Since then, he has criticized the startup and its director Sam Altman, ironically suggesting the company be renamed ClosedAI.

In February, Musk sued OpenAI. He argued that the startup ceased to be open after releasing a closed-source AI product and accused Altman of violating the co-founding agreement.

Another step towards confrontation with OpenAI was the release of Grok-1’s source code. This allowed anyone interested to explore the chatbot’s foundation and experiment with it.

In April, xAI introduced the first multimodal version of Grok-1.5V.