Updated December 25, 12:21 PM PT: Added details on xAI’s valuation and Kingdom Holdings’ contribution.
Elon Musk’s AI company xAI has raised $6 billion in a Series C funding round.
The company announced this week that participation included Andreessen Horowitz, Blackrock, Fidelity, Lightspeed, MGX, Morgan Stanley, OIA, QIA, Sequoia Capital, Valor Equity Partners, Vy Capital, Nvidia and AMD.
Kingdom of Saudi Holdings The conglomerate holding company invested about $400 million in the round, according to public filings. The filing also revealed that xAI’s current value is $45 billion, nearly double its previous value.
The new cash brings xAI’s total to $12 billion, adding to the $6 billion xAI tranche raised in May.
According to the Financial Times, only investors who backed xAI in previous funding rounds were eligible to participate in this funding round. Investors who funded Musk’s Twitter acquisition reportedly had access to up to 25% of xAI shares.
“xAI’s most powerful models are currently in training and we are focused on launching innovative new consumer and enterprise products,” xAI said in a statement. “The funds raised from this financing round will be used to further accelerate our cutting-edge infrastructure, bring groundbreaking products to market, and accelerate research and development.”
AI Enhancement
Musk founded xAI last year. Soon after, the company launched Grok, its flagship generative AI model that powers many of X’s features, including chatbots, accessible to X premium subscribers and free users in some regions.
Grok has what Musk describes as a “rebellious streak,” a willingness to answer “hard questions that most other AI systems reject.” For example, if Grok is called vulgar, he will happily respond by spewing profanity and colorful language that you won’t hear in ChatGPT.
Musk has derided ChatGPT and other AI systems for being too “woke” and “politically correct,” despite Grok’s own unwillingness to cross certain boundaries and hedge on political topics. Despite evidence that Grok is leaning left, he referred to Grok as “pursuing the truth as much as possible” and being less biased than competing models.
Over the past year, Grok has become increasingly ingrained in X, the social network formerly known as Twitter. At launch, Grok only It is available for X users and developers skilled enough to get up and running with the “open source” version.
Thanks to integration with xAI’s internal image generation model, Aurora, Grok can generate images from X (without controversial guardrails). The model can also analyze images and imperfectly summarize news and popular events.
According to the report, Grok could handle more X features in the future, from enhancing X’s search capabilities and account bios to helping with post analysis and reply settings. X has recently received the “Grok button” designed to find the “related context” and to find out more about the latest discussion and real -time events.
xAI is sprinting to catch up with strong competitors like OpenAI and Anthropic in the generative AI race. The company launched its API in October, allowing customers to build Grok into third-party apps, platforms, and services. And we released a standalone Grok iOS app to our test audience.
Musk insists it’s not a fair fight.
In a lawsuit filed against OpenAI and its close partner Microsoft, Musk’s lawyers accused OpenAI of “actively seeking to eliminate competitors” like xAI by “extracting a promise not to fund them from investors” . Musk’s lawyers say OpenAI is unfairly benefiting from Microsoft’s infrastructure and expertise in what the lawyers describe as a “de facto merger.”
But Musk often says that X’s data is what gives xAI an edge over its competitors. Last month, X changed its privacy policy to allow third parties, including xAI, to train models on X posts.
Musk was one of OpenAI’s original founders and left the company in 2018 due to disagreements over its direction. He claimed in a previous lawsuit that OpenAI profited from his early involvement but reneged on its nonprofit promise to make the fruits of its AI research available to all.
OpenAI naturally disagrees with Musk’s interpretation of events. In a mid-December press release, the company called Musk’s lawsuit misleading, baseless and sour.
xAI ecosystem
xAI outlined its vision that its models would be trained on data from Musk’s various companies, including Tesla and SpaceX, and that the models could improve technology across those companies. xAI is already ramping up customer support for SpaceX’s Starlink internet service, and the startup is in talks with Tesla to provide R&D in exchange for a share of the automaker’s profits, according to The Wall Street Journal.
Tesla shareholders oppose these plans. Several people have filed lawsuits over Musk’s decision to launch xAI, claiming that he essentially diverted both Tesla’s talent and resources into competing ventures.
Nonetheless, this deal and xAI’s developer and consumer-facing products bring xAI’s annual revenue to approximately $100 million. By comparison, Anthropic is reportedly on track to generate $1 billion in revenue this year, and OpenAI is targeting $4 billion by the end of 2024.
Musk said xAI was built this summer in just 122 days and is currently training the next generation of Grok models in a Memphis data center powered in part by portable diesel generators. The company hopes to upgrade its server farm with 100,000 Nvidia GPUs next year. In a press release, xAI said it plans to completely double that number. (GPUs are the preferred chips for training and running models because of their ability to perform many computations in parallel.)
In November, xAI received approval from the Memphis Area Power Authority for 150 MW of additional power, enough to power about 100,000 homes. To convince the agency, xAI promised to improve the quality of the city’s drinking water and provide Tesla-manufactured batteries to the Memphis power grid at a discounted price. But some residents criticized the move, arguing it would strain the power grid and worsen air quality in the area.
Tesla is also expected to use its upgraded data center to improve autonomous driving technology.
In the year since its founding, xAI has grown very quickly operationally, going from just 12 employees in March 2023 to over 100 employees today. In October, the startup moved into OpenAI’s old corporate offices in San Francisco’s Mission District.
xAI has reportedly told investors it plans to raise more funding next year.
It won’t be the only AI lab raising tons of cash. Anthropic recently secured $4 billion from Amazon, bringing its total raised to $13.7 billion, while OpenAI raised $6.6 billion in October, bringing its war chest to $17.9 billion.
Megadeals like OpenAI and Anthropic drove AI venture capital activity to $31.1 billion across more than 2,000 deals in the third quarter of 2024, according to PitchBook data.
TechCrunch has a newsletter focused on AI! Sign up here You can receive it in your inbox every Wednesday.
