xAI, Elon Musk’s 10-month-old competitor to the artificial intelligence phenomenon OpenAI, is raising $6 billion at a preliminary valuation of $18 billion, in accordance with one trusted source near the deal. The deal – which is able to see investors gain a quarter of the company’s stake – is expected to shut inside the next few weeks unless the terms of the deal change.
The terms of the contract have already modified once. Last weekend, Jared Birchall, who heads Musk’s family office, told potential investors that xAI was raising $3 billion at a preliminary valuation of $15 billion. Taking into account the number of investors willing to participate in the transaction, these numbers were quickly adjusted.
Our source says: “We all got an email that principally said, ‘Now it’s $6 billion of $18 billion and don’t complain because there are plenty of other individuals who wish to do it.’
Investors, who had been lobbying for months for this deal, had no objections. The round includes Sequoia Capital and Future Ventures, a enterprise capital fund co-founded by Musk’s longtime friend Steve Jurvetson.
Other participants will likely be Valor Equity Partners and Gigafund, whose founders also belong to Musk’s inner circle, which is famous for combining the personal with the private. (These investors have not been contacted; xAI does not have a press function.)
Jurvetson sits on the board of SpaceX and was a Tesla director until 2020. Gigafund co-founder Luke Nosek, who previously co-founded Founders Fund with investor Peter Thiel, was the first enterprise investor to write down a check to SpaceX and has served on its board ever since . Valor founder Antonio Gracias was one of Tesla’s early investors; like Jurveston, he is a former Tesla executive and also sits on the board of SpaceX.
Our source said that it is not entirely clear for the remaining investors involved in the transaction on account of the way in which the obligations will likely be implemented. “It’s a Zoom call, just you, Elon and Jared [on the other side] at a table with some engineers.
The tone, this person says, is charming.
xAI’s marketing literature already makes clear that the company’s ambition is to attach the digital and physical worlds, but what is probably not widely understood is that Musk plans to do this by pulling training data from each of his firms, including Tesla, SpaceX, his mining company Boring Company tunnels and Neuralink, which develops computer interfaces that will be implanted in human brains.
Of course, Musk’s next company is X. The social media platform has already included its months-old xAI chatbot, Grok, as a paid add-on. But this is just one piece of what Musk predicts investors will turn out to be a vast virtual cycle.
For example, in the case of Grok, X is each a customer and provides Grok with mass distribution. Ultimately (enters the field) Grok will likely be fed with data from Musk’s other firms, which is able to help him master the physical world in potentially limitless ways, starting with truly autonomous cars.
Another likely beneficiary can be Tesla’s humanoid robot, Optimus. Today, the Tesla robot is still in the laboratory, but Musk he told analysts earlier this week made the call that Optimus would give you the chance to perform tasks at Tesla factories by the end of this yr. Even if that timeline proves ambitious, these slick assistants may give you the chance to do more — and faster than previously thought — if Musk’s overarching vision involves fruition.
In the meantime, the most immediate beneficiary of xAI’s growing momentum could also be X itself. While the platform has turn out to be something of a toxic cesspool in the 1.5 years since Musk bought it, and subsequently lost much of its value, Musk has already made sure that X owned shares in xAI, so it should profit from all the benefits of the AI set.
The open query is what all this implies for OpenAI, which last yr became the fastest-growing startup in history. Musk has had OpenAI in his sights ever since the company began growing following the release of its ChatGPT chatbot.
Musk co-founded OpenAI in 2015 and left its board in 2018 over disagreements over the direction of the company, which began as a nonprofit and later transitioned to a for-profit entity. Since then, Musk has publicly hated OpenAI co-founder Sam Altman and mocked the brand, suggesting it’s called itself as a substitute ClosedAI.
Last month, when Musk acquired the architecture of the earliest xAI chatbot “Grok-1,” meaning anyone can now download and modify it, the move was one other part of his ongoing campaign to distinguish his efforts from OpenAI, which does not shared its secret sauce with the world, and which Musk is now suing.