Elon Musk’s AI startup, xAI, is reportedly in talks with investors worldwide, aiming to raise $6 billion in funding to compete with Microsoft-backed artificial intelligence company OpenAI.
The goal is to secure fresh equity capital for xAI at a proposed valuation of $20 billion, the Financial Times (FT) reported Friday (Jan. 26), citing unnamed sources.
Musk denied an earlier report that xAI has raised $500 million and that the firm was discussing a valuation of $15 billion to $20 billion. In a Jan. 19 post on X, he said of the Bloomberg News report: “This is simply not accurate.”
Friday’s FT report said that Musk has been actively engaging with wealthy individuals and investors to gauge investor appetite for such a $6 billion investment.
He has targeted family offices in Hong Kong, sovereign wealth funds in the Middle East and investors in Japan and South Korea, according to the report.
Raising funds in Hong Kong for a U.S.-based AI firm may face political challenges due to rising geopolitical tensions and export controls imposed by the United States on Chinese AI, the report said.
xAI unveiled its first product, a chatbot named Grok, in November. Because Grok is trained on the X platform, it has real-time knowledge of the world, Musk said at the time.
The need for substantial funding for the company arises from the costs associated with developing generative AI models capable of producing human-like text, images and code within seconds, according to Friday’s FT report.
OpenAI, xAI’s rival, has already secured approximately $13 billion from Microsoft alone, the report said. Other start-ups like Anthropic and Cohere have also raised billions of dollars from major tech companies and venture capital groups.
Musk, who was involved in the creation of OpenAI but left its board in 2018, launched xAI in July, saying he would create a “maximum truth-seeking AI” and provide an alternative to OpenAI and Google’s DeepMind.
In December, xAI filed documents with the Securities and Exchange Commission (SEC), indicating its intention to raise $1 billion in funding from equity investors. At that time, it had already raised nearly $135 million.