New Delhi: Over the weekend, Elon Musk’s AI startup, xAI, raised $6 billion in a venture funding round, bringing the OpenAI competitor’s private market valuation to a whopping $24 billion. xAI’s fundraising round, Series B, is the largest in the history of venture capital, dwarfing Zynga’s previous record of $300 million. xAI was officially launched in July 2023, and this startup is the 12th most valuable startup in the world.
While xAI is still significantly smaller than OpenAI, which is currently valued at $80 billion and has garnered international attention for its rapid strides in AI (the company said this week it has begun training a new AI model more powerful than GPT-4), Musk plans to invest the newly raised funds in purchasing 100,000 Nvidia H100 GPUs to train and operate a new supercomputer that will make xAI’s chatbot, called “Grok,” the market leader.
This GPU cluster, which Musk referred to as a “Gigafactory of Compute” in his presentation to investors, would be four times larger than existing GPU clusters but is based on Nvidia (NVDA)’s previous-generation hardware. Nvidia has since announced the much-improved Blackwell-based B100 and B200 GPUs, which will ship later this year.
Meanwhile, OpenAI is also looking to secure big-ticket investments. In February, OpenAI CEO Sam Altman revealed he is seeking as much as $7 trillion, more than the U.S.’s annual federal spending, to build the semiconductor infrastructure needed to supercharge AI growth. If Altman is right about how capital-intensive future AI technology will be, both OpenAI and xAI are far short of the fundraising needed to achieve their goals.
xAI’s Series B investors include a number of big names in venture capital, including Andreessen Horowitz and Sequoia Capital, as well as Cathie Wood’s Ark Investment Management and Saudi Prince Alwaleed bin Talal (an early investor in Twitter). Information about how much equity or voting power each investor holds isn’t publicly available.
Investors who participated in xAI’s previous funding rounds include Valor Equity Partners, Vy Capital, and Fidelity Management & Research Company. The significant funding highlights the eagerness of global investors to capitalize on the AI boom. It comes on the heels of billions invested by Big Tech into their own AI ventures.
Musk founded xAI last year after saying Altman had “breached the founding agreement” of OpenAI by focusing too much on profit rather than humanitarian good. Musk was previously the founding co-chairman at OpenAI but left in 2018 over disagreements on AI safety. Musk serves as xAI’s CEO and is joined by 11 others to create the firm’s founding team. Jared Birchall, Musk’s personal money manager, serves as the startup’s CFO, according to xAI’s registration filing. Birchall is an investment banker who also serves as CEO of Neuralink, a Musk venture producing implantable brain chips.
