Musk’s AI startup xAI in talks to raise $20 billion at $120 billion valuation to challenge OpenAI and Google

Elon Musk’s artificial intelligence startup xAI is gearing up for a major fundraising push that could surpass $20 billion, according to Bloomberg.

The new round would push xAI’s valuation past $120 billion, marking another big leap for the company just four months after it closed a $6 billion Series C backed by heavyweights like Andreessen Horowitz,  A16Z, Blackrock, and Fidelity Management & Research Company.

“Elon Musk’s XAI Holdings is in talks with investors to raise roughly $20 billion in funding for his newly combined artificial intelligence startup and social media business,” Bloomberg reported, citing people familiar with the ongoing talks.

During a recent call with xAI investors, Musk didn’t directly mention a new funding round, but “sources familiar with the matter told Faber” that one is likely coming soon. The exact amount is still up in the air, Bloomberg added.

The news also follows xAI’s move last month after it acquired X (formerly Twitter), Musk’s social media platform, in an all-stock deal that valued xAI at $80 billion and X at $33 billion. Sources told CNBC earlier this month that Musk was looking to assign “proper value” to xAI.

“‘xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution, and talent,’ Musk said on X, announcing the deal. ‘This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.’”

Musk launched xAI in July 2023 with a goal that sounds straight out of a sci-fi novel: to explore the universe’s deepest mysteries. His team includes heavy hitters from Google DeepMind, OpenAI, Microsoft Research, and Tesla — engineers and scientists behind breakthroughs like AlphaCode and GPT-3.5/4.

Musk seems intent on turning xAI into a heavyweight contender against established players like OpenAI, Google, and Anthropic, all of whom have built major names around their flagship AI models.

Launched by Musk in July 2023, xAI set out with a mission to explore the universe’s deepest mysteries. The xAI team includes top talent from companies like Google DeepMind, OpenAI, Microsoft Research, and Tesla—people who have driven advancements such as DeepMind’s AlphaCode and OpenAI’s GPT-3.5 and GPT-4. Musk appears to be positioning xAI as a formidable player in the AI space, aiming to compete with giants like OpenAI, Google, and Anthropic, each known for their flagship AI models.

Although Musk co-founded OpenAI in 2015, he left the board in 2018 and has since voiced skepticism about Big Tech’s direction in AI, citing concerns about potential censorship. Musk’s recent AI vision includes a “truth-focused” AI, designed to counter offerings like Google’s Bard and Microsoft’s Bing AI by exploring fundamental truths about the universe.