Elon Musk's AI company xAI has raised $6 billion, according to a filing with the U.S. Securities and Exchange Commission on Thursday.
Investors contributed a minimum of $77,593, according to the filing (97 people participated, but their identities were not disclosed in the document). xAI later (confirming some previous reports) said Andreessen Horowitz, BlackRock, Fidelity, Kingdom Holdings, Lightspeed, MGX, Morgan Stanley, OIA, QIA, Sequoia Capital, Valor Equity Partners, Vy Capital, NVIDIA, AMD, etc. were announced to be included. .
This new cash brings xAI's total funding to $12 billion, joining the $6 billion tranche xAI raised this spring. CNBC reported in November that xAI was aiming for a $50 billion valuation, double its valuation six months ago.
According to the Financial Times, only investors who backed xAI in the previous funding round were allowed to participate in the latest funding round. Investors who helped finance Musk's acquisition of Twitter were reportedly given access to up to 25% of xAI stock.
AI enhancement
Musk founded xAI last year. Shortly after, the company released Grok, its flagship generative AI model, which powers many of X's features, including a chatbot that is now accessible to X Premium subscribers and free users in some regions.
Grok has what Musk described as a “rebellious personality,” one that is willing to answer “tough questions that most other AI systems would refuse.” For example, if you're called vulgar, Grok will gladly go along with it, spouting profanity and colorful language that you won't hear on ChatGPT.
Musk claims that ChatGPT and other AI systems are too “woke” and “political”, even though Grok himself doesn't want to cross certain lines or avoid political subjects. “That's right,” he said mockingly. He also says that Grok is “truth-oriented to the fullest” and less biased than competing models, although there is also evidence to suggest that Grok leans to the left.
Over the past year, Grok has increasingly penetrated X, the social network formerly known as Twitter. At its launch, Grok was only available to X users and developers skilled enough to get the “open source” edition up and running.
Thanks to integration with the open image generation tool Flux, Grok can generate images on top of X (without controversial guardrails). The model also analyzes images and can (albeit imperfectly) summarize news and trending events.
According to the report, Grok may handle more X features in the future, from enhanced X search capabilities and account history to post analysis and help with reply settings.
xAI is doing everything it can to catch up with strong competitors like OpenAI and Anthropic in the generative AI race. The company released an API in October to allow customers to incorporate Grok into third-party apps, platforms, and services. According to the Wall Street Journal, xAI is preparing to release a standalone consumer app similar to OpenAI in December.
Musk insists it wasn't a fair fight.
In a lawsuit filed against OpenAI and Microsoft, a close collaborator of OpenAI, Musk's lawyers claim that OpenAI “extracted commitments from investors not to provide funding” to “We are actively trying to eliminate our competitors,” he said. Musk's lawyers say OpenAI is also profiting from Microsoft's infrastructure and expertise in what the lawyers call a “de facto merger.”
Still, Musk often says that X's data gives xAI an advantage over its rivals. Last month, X changed its privacy policy to allow third parties, including xAI, to train models on X's posts.
Musk, it's worth noting, was one of OpenAI's original founders and left the company in 2018 following disagreements over its direction. In previous lawsuits, he alleged that OpenAI profited from his early involvement but violated its nonprofit pledge to make the results of AI research available to all. I've done it.
xAI ecosystem
xAI outlines a vision for training models on data from Musk's various companies, including Tesla and SpaceX, and that the models improve technology across those companies. The company has already strengthened the customer support capabilities of SpaceX's Starlink internet service, and the startup is in talks with Tesla to provide research and development in exchange for a portion of the automaker's revenue, according to the Wall Street Journal. It is said that it does.
One Tesla shareholder opposes these plans. Some have sued Musk over his decision to launch xAI, accusing him of diverting both talent and resources from Tesla to what is essentially a competing business.
Nevertheless, this deal and xAI's developer and consumer products brought xAI's revenue to around $100 million annually. For comparison, Anthropic is on pace to generate $1 billion in revenue this year, and OpenAI is reportedly targeting $4 billion by the end of 2024.
Musk said this summer that xAI is training the next generation of Grok models in its Memphis data center. The data center was apparently built in just 122 days and is currently partially powered by portable diesel generators. The company wants to upgrade its server farm with 100,000 Nvidia GPUs next year. xAI said in a press release that it plans to fully double that number. (GPUs are the preferred chip for training and running models because they can perform many calculations in parallel.)
In November, xAI won approval for 150MW of additional power from the Memphis Regional Power Authority. This is enough to power approximately 100,000 homes. To convince the agency, xAI promised to improve the quality of the city's drinking water and provide discounted Tesla batteries to Memphis' power grid. But some residents criticized the move, saying it would strain the power grid and worsen local air quality.
Tesla is also expected to use the upgraded data center to improve its self-driving technology.
xAI has expanded very rapidly from an operational standpoint in the year since its founding, growing from just 12 employees in March 2023 to over 100 employees today. In October, the startup moved into OpenAI's former offices in San Francisco's Mission District.
xAI reportedly told investors that it plans to raise more money next year.
This is not the only AI lab attracting huge amounts of funding. Anthropic recently secured $4 billion from Amazon, bringing its total funding to $13.7 billion, while OpenAI raised $6.6 billion in October, increasing its war chest to $17.9 billion.
Mega deals like OpenAI and Anthropic drove AI venture capital activity to $31.1 billion in more than 2,000 deals in Q3 2024, according to PitchBook data.
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