Elon Musk’s xAI, a competitor to OpenAI, is currently raising $6 billion on a pre-money valuation of $18 billion. The deal, expected to close in the next few weeks, has already seen changes in its terms. Initially, the plan was to raise $3 billion at a $15 billion pre-money valuation, but due to high demand, the numbers were quickly adjusted.
Investors have been eagerly lobbying to get into the deal for months, and notable participants include Sequoia Capital and Future Ventures, co-founded by Musk’s friend Steve Jurvetson. Other potential participants are Valor Equity Partners and Gigafund, whose founders are part of Musk’s inner circle.
The exact details of the deal are not widely known to other investors, as commitments were gathered through Zoom calls with Musk and his team. However, the pitch has been described as captivating.
xAI’s marketing literature reveals its ambition to connect the digital and physical worlds. What may not be widely understood is that Musk plans to achieve this by leveraging training data from each of his companies, including Tesla, SpaceX, Boring Company, and Neuralink. This integration of data will contribute to xAI’s ability to master the physical world.
One of Musk’s other companies, X, has already incorporated xAI’s chatbot, Grok, into its platform as a paid add-on. Musk envisions a virtual cycle where Grok receives data from his other companies, starting with self-driving cars. Tesla’s humanoid robot, Optimus, is another potential beneficiary of xAI’s momentum. Musk aims for Optimus to perform tasks in Tesla’s factories by the end of the year.
The growing momentum of xAI may have immediate benefits for X itself. Although the platform has faced challenges since Musk acquired it, X owns a stake in xAI and will benefit from its success.
The implications for OpenAI, which experienced significant growth last year, remain uncertain. Musk has been critical of OpenAI since leaving its board in 2018. He has publicly criticized co-founder Sam Altman and even proposed renaming the company as ClosedAI. Musk’s recent move to open-source xAI’s chatbot architecture further distinguishes his efforts from OpenAI, which has not shared its proprietary technology with the public and is now facing a lawsuit from Musk.