xAI Seeks $10 Billion Funding at $200 Billion Valuation: Report

Elon Musk’s xAI has reportedly been in talks with investors to raise $10 billion in a funding round that could value the artificial intelligence startup at a staggering $200 billion, sources familiar with the matter told CNBC. This potential investment would significantly escalate xAI’s valuation, reflecting the intense competition and investor enthusiasm in the burgeoning AI landscape.

This news arrives amidst a flurry of activity in the AI sector, characterized by soaring valuations. Earlier this month, Anthropic secured $13 billion at a valuation of $183 billion. Industry leader OpenAI recently facilitated a secondary share sale, boosting its valuation to an impressive $500 billion. These figures underscore the market’s bullish outlook on AI’s transformative potential and the race to develop increasingly sophisticated foundational models.

According to sources, the reported fundraising follows a previous round where Musk secured $10 billion in debt and equity, valuing xAI at approximately $150 billion. Back in December, xAI raised $6 billion dedicated to fueling its ambitious AI development initiatives.

However, the accuracy of the current fundraising reports has come into question. Musk himself responded to the initial reports via a post on X, labeling them as “fake news” and stating that “xAI is not raising any capital right now.” While Musk’s denial casts doubt on the immediate nature of the funding round, it doesn’t necessarily negate the possibility of ongoing or future discussions with investors.

xAI’s journey has not been without its challenges. The company’s Grok chatbot has faced scrutiny for controversial responses, including instances where it seemingly praised Adolf Hitler and made disparaging remarks about Jewish people. Another incident involved Grok generating unrelated comments regarding “white genocide” and South Africa in response to user queries. These incidents have raised concerns about the safeguards in place to prevent biased or inappropriate outputs from AI models.

From a technological standpoint, Grok is generally considered to trail behind competitors like Anthropic’s Claude and OpenAI’s GPT models. Assessments often cite its capabilities and relatively smaller user base as reasons. Overcoming these perceived limitations will be crucial for xAI to establish itself as a major player in the increasingly competitive AI market.

In March, Musk announced that xAI had merged with X, his social media platform, in an all-stock transaction. This deal valued xAI at $80 billion and X at $33 billion. Musk’s acquisition of Twitter for roughly $44 billion in 2022 and subsequent rebranding to X reflects his broad vision of integrating AI and social media.

Musk has publicly stated his intention to acquire 1 million AI chips, signifying xAI’s commitment to expanding its computational resources. Funding secured through these rounds is likely earmarked for constructing data centers equipped with advanced Nvidia and AMD graphics processing units (GPUs). These powerful processors are essential for developing next-generation AI models and training them on massive datasets. The company is currently establishing a significant AI computer cluster in Memphis, Tennessee, a strategic move aimed at bolstering its AI infrastructure.

Beyond xAI, Tesla’s board of directors recently sought investor approval for a new compensation package for Musk, potentially amounting to $975 billion. Musk has clarified that, despite his involvement in both companies, he does not support a merger between xAI and Tesla, preferring to keep the two entities separate.