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Musk’s xAI Finalizing Funding Round Valued at $18 Billion, OpenAI Rival Attracts Sequoia Capital and Other Investors

Last Updated May 9, 2024 1:47 PM
Shraddha Sharma
Last Updated May 9, 2024 1:47 PM

Key Takeaways

  • xAI Corp. is completing a funding round that is expected to bring its valuation to approximately $18b.
  • The funding initiative positions xAI as a contender against OpenAI.
  • Musk’s AI move comes a year after advocating for cautious AI development.

Elon Musk is set to escalate the AI technology race for his startup, xAI Corp. by securing funding and potentially boosting its valuation to around $18b. 

The move comes a year after Musk raised global concerns over the rapid advancement of AI technologies, emphasized by an open letter for a temporary development pause. Now the funding round places Musk-led AI startup next to $80b valued OpenAI

Elon Musk Accelerates AI Race With xAI Funding

Elon Musk’s AI startup, xAI Corp., is reportedly  set to close a funding round. A source-based report by Bloomberg notes that it could elevate xAI’s valuation to around $18b. 

The precise size of the funding round remains undecided, but details could emerge in the next few days. 

According to an April report by Bloomberg, the deal size could be around $6b. The funding round could position xAI as a competitor in the AI sector, directly challenging industry giants like OpenAI.

The development comes over a year after over 33,000 individuals, including Elon Musk, called for an immediate six-month suspension on the development of AI systems more advanced than GPT-4. 

The letter stressed  the need for careful planning and management and criticized the current “out-of-control race” to create increasingly powerful AI without adequate understanding or control. 

In the open letter, published in March 2023 Musk indicated that Grok 2, an AI system developed by xAI, is expected to surpass existing AI technologies across all performance metrics once its training is completed

The Funding Environment in the Sector 

Since xAI’s launch, Musk has been embroiled in a public divergence with OpenAI, signaling a competitive tension. And with the forthcoming round expected to include investors like Sequoia Capital, it could reinforce the AI competition. In February 2024, OpenAI’s valuation was close  to $80b. 

According to Bloomberg’s previous report , xAI had initially sought to raise between $3b-$4b but increased investor interest in AI may push the total beyond the higher end of the spectrum.

According to data  from Crunchbase, investment in AI-related startups rose in the first quarter of 2024 compared to the fourth quarter of 2023. The initial three months of 2024 witnessed $12.2b funneled into 1,166 deals involving venture-backed AI startups, marking a 4% increase from the $11.7b invested in Q4 2023. 

AI Funding | Source: Crunchbase
AI Funding | Source: Crunchbase

Meanwhile, xAI’s pitch to investors also leverages Musk’s renowned entrepreneurial success with Tesla Inc. and SpaceX.

That said, the report says that the deal has the potential for adjustments in valuation and timeline with details expected to be finalized in a week from May 9. 

Meanwhile, several other AI businesses are getting a piece of the funding pie. Myelin Foundry secured  $4m in equity funding for their AI platforms and to expand their global reach. Atlan  raised $105m in a round led by Singapore’s sovereign wealth fund GIC at a valuation of $750m. Additionally, UK-based Wayve raised  $1b in what is being called Europe’s largest-ever AI funding round, focusing on developing AI for autonomous vehicles.

AI Race Heats Up

Elon Musk’s xAI Corp. is on the brink of concluding a significant funding round. The development comes amid a competitive environment in the sector and a broader discourse on the ethical and management concerns of AI development. 

However, the funding round could solidify xAI’s standing against competitors like OpenAI. At the same time, Musk, who has both criticized the hasty development of powerful AI technologies and actively participated in escalating the technology’s boundaries, may be setting a strategic example. 

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