Report: Musk-Liked Investors Plan $3 Billion Funding Round for xAI

Investors tied to Elon Musk are reportedly planning a $3 billion funding round for xAI.

This round would value the artificial intelligence (AI) firm at $18 billion, The Wall Street Journal (WSJ) reported Friday (April 5), citing sources familiar with the matter. 

Sources told WSJ that venture capital company Gigafund and Steve Jurvetson, a prominent Musk backer and co-founder of another venture firm, are among the investors considering taking part in the funding round.

According to the report, Jurvetson is a longtime friend of Musk and member of the board of his rocket company SpaceX. He was also a director at Tesla. And Gigafund was co-founded by Luke Nosek, another SpaceX director, who – like Musk – was part of the “PayPal mafia,” a group that founded the payments company. 

The funding round would follow major fundraising efforts by AI firms in recent months, such as Microsoft’s $13 billion investment into OpenAI, maker of ChatGPT. Anthropic, OpenAI’s chief rival, has raised more than $6 billion.

The WSJ report noted that some investors are skeptical that xAI — which launched in July — has enough time to compete with other leading AI companies. 

xAI launched its Grok chatbot in November, making it available to Musk’s social media platform X. In March, xAI debuted its latest AI model, known as “Grok-1.5.”

The news follows reports from January that xAI was in talks to raise $6 billion with the goal of reaching a valuation of $20 billion. Musk had denied earlier reports that xAI had raised $500 million and that the firm was eyeing a valuation of $15 billion to $20 billion. 

Last month, Musk announced that xAI would open-source Grok, a move that some say could democratize AI technology and spark innovation in commercial applications. It’s an effort happening amid Musk’s continued criticism and legal action against OpenAI for not being transparent with its AI models.

“Open source models could lead to more competition and, potentially, lower costs for businesses looking to leverage AI in their operations,” Richard Gardner, the CEO of the tech consultancy Modulus, told PYMNTS in an interview. “As the underlying models become more accessible, competition might shift towards the quality of data used to train them and the expertise in applying those models to solve specific business problems.”