Elon Musk's xAI eyes $6 billion funding to challenge ChatGPT maker OpenAI

In a bid to revolutionise the artificial intelligence (AI) landscape, Elon Musk's startup, xAI, is reportedly in discussions to secure a substantial funding round of up to $6 billion, with a proposed valuation of $20 billion. 

This news, revealed by the Financial Times on Friday, signals Musk's determination to carve a significant presence in the AI domain, potentially rivalling established players like OpenAI.

Sources familiar with the matter disclosed that xAI has been engaging with family offices in Hong Kong and is strategically targeting sovereign wealth funds in the Middle East for the funding initiative. The reported funding drive represents a noteworthy escalation in the ongoing AI race, with various investors making substantial investments in startups aiming to capitalize on the growing interest in AI technology, particularly in Silicon Valley.

This potential $6-billion fundraise surpasses xAI's initial goal, as the company had previously set a target of $1 billion in a filing with the U.S. Securities and Exchange Commission last month. While a $20 billion valuation for xAI would still be dwarfed by OpenAI's valuation, it aligns with other players in the industry, such as Anthropic, backed by Google.

The Financial Times reported that Musk has been reaching out to investors in Japan and South Korea to garner support for the fundraising endeavour. Morgan Stanley is reportedly coordinating this substantial fundraise, leveraging its experience as one of the financial institutions involved in Musk's acquisition of the social media platform X (formerly known as Twitter).

Last week, Musk refuted claims that xAI had secured $500 million in commitments from investors toward a $1 billion funding goal. The entrepreneur, also CEO of Tesla, has been outspoken about his commitment to developing safer AI. Although Musk co-founded OpenAI in 2015, he resigned from its board in 2018.

xAI made headlines last year with the launch of "Grok," a chatbot positioned as a competitor to OpenAI's ChatGPT. Musk has consistently emphasised the importance of responsible AI development, recently cautioning against advancing AI and robotics outside Tesla unless he gains more voting control within the electric vehicle company, expressing discomfort about leading Tesla into the AI sector without 25% voting control.

The flourishing popularity of ChatGPT has contributed to the buoyancy of the AI industry amid a generally subdued startup funding environment. Other players in the field, such as Anthropic and Microsoft-backed Inflection AI, have also successfully secured funding in recent months.

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