Elon Musk Raising $4B for AI Company xAI, Eyes $18B Post-Deal

Elon Musk's newly founded AI company, xAI, is seeking $3-$4 billion in funding to reach a post-deal valuation of $18 billion. The company is targeting a short fundraising window and is using special purpose vehicles (SPVs) to accommodate investor participation. xAI's major selling point is its Grok chatbot, which reportedly outperforms OpenAI's ChatGPT and was developed using data from Musk's X microblogging network.

Elon Musk Seeks $4 Billion for AI Company xAI, Aiming for $18 Billion Post-Deal Valuation

Amidst the burgeoning artificial intelligence (AI) landscape, tech visionary Elon Musk is embarking on an ambitious fundraising campaign for his latest venture, xAI, a company specializing in AI chatbot development. With the recently launched Grok chatbot under its belt, xAI is setting its sights on raising $3 billion to $4 billion in capital.

In a recent email circulated to prospective investors, Musk outlined plans to incorporate special purpose vehicles (SPVs) to facilitate participation in xAI's fundraising rounds. SPVs act as investment vehicles, enabling multiple investors, including venture capital firms and private individuals, to pool their resources under a single entity. While SPVs provide a structured approach to investing, they entail upfront costs estimated at 5%, accompanied by ongoing management fees and interest charges.

Musk's fundraising aspirations target a post-deal valuation of $18 billion for xAI. The email explicitly stated the intent to secure funding "in the next 2-3 weeks on a first-come, first-served basis."

Established in March 2023 and formally launched in July of the same year, xAI is headquartered in the San Francisco Bay Area. The company's overarching mission is to "understand the fundamental nature of the universe." Its inaugural product, the X-linked chatbot Grok, was released in November and is touted to surpass OpenAI's ChatGPT in capabilities.

The investor email highlighted the AI model's training on data sourced from Musk's X microblogging platform as a compelling selling point, alongside Musk's proven success with Tesla.

Despite concerns raised by some industry experts regarding the potential for an "AI bubble" amidst soaring valuations and excessive development expenditures, xAI emphasizes its focus on internal capabilities. The company website elucidates its strategy of utilizing AI tutors spanning various disciplines to generate and refine high-quality data for model training and evaluation.

In March 2023, Musk announced that xAI's AI chatbot would be open-sourced, positioning it as a competitor to proprietary models such as OpenAI's ChatGPT.

Despite its high valuation and innovative technology, xAI remains relatively small-scale. Its team comprises approximately 10 full-time programmers, and its computational infrastructure utilizes between 5,000 and 10,000 graphics processing units (GPUs).

Cointelegraph's request for further comment from xAI representatives did not elicit an immediate response. Grok's presence in the competitive AI chatbot market faces challenges from established technologies, including OpenAI's ChatGPT, Antropic's Claude, Microsoft's Copilot, Google's Gemini, and Meta AI (formerly known as Facebook AI).