Elon Musk’s AI Start-Up Seeks to Raise $6Bn From Investors

Elon Musk’s AI company, xAI, is discussing plans to secure funding of up to six billion dollars. The Tesla and X leader is reaching out to investors worldwide, including those in Hong Kong, as he aims to compete with Microsoft-supported OpenAI.

Sources reveal that the billionaire’s AI startup has been engaging with affluent individuals and investors globally over the past few weeks, as reported by the Financial Times.

In these discussions, four individuals mentioned that family offices in Hong Kong have been involved.

A total of three insiders shared that Musk aims to secure up to six billion dollars in new equity capital for xAI, proposing a valuation of twenty billion dollars. It is essential to note that ongoing negotiations are taking place, and Musk, the head of Tesla, is still gauging investor interest in dealing with such significant amounts.

Furthermore, one source mentioned his outreach to sovereign wealth funds in the Middle East, while others indicated that investors in Japan and South Korea have also been approached, explained the Financial Times.

Tesla $TSLA CEO Elon Musk's AI start-up, xAI, aims to raise $6 Billion from investors to challenge Microsoft-backed OpenAI. – Financial Times pic.twitter.com/O7zGa6VkO7

— Wall St Engine (@wallstengine) January 26, 2024

Securing funds in Hong Kong for a US AI company might involve facing challenges amid growing geopolitical tensions.

In responding to these tensions, the United States government has implemented export controls aimed at hindering China’s progress in advanced technologies. Last year, the Biden administration imposed restrictions on certain US investments in Chinese AI, extending the limitations to Hong Kong as well, as reported by the Financial Times.

xAI’s Grok is being trained on posts on X

In December, Musk’s xAI introduced its first product, a chatbot named Grok. Grok stands out by using social media posts on X for training, enabling it to offer more current answers compared to its rivals.

Morgan Stanley, which played a role in financing Musk’s leveraged buyout of X in 2022, is overseeing the fundraising efforts, as per one source. The bank chose not to provide comments, and Musk did not respond to an email seeking his input.

The large scale of this fundraising endeavor highlights the substantial costs involved in developing generative AI. These models, capable of generating human-like text, images, and code in seconds, demand extensive computing power, vast data sets, and cutting-edge chips.

OpenAI, a competitor based in San Francisco, has amassed approximately thirteen billion dollars in funding, with Microsoft being a significant contributor.

Other startups such as Anthropic and Cohere have also secured substantial investments, with support coming from major players like Google, Amazon, and leading venture capital groups in Silicon Valley.

xAI, headquartered in Nevada, submitted documents to the US Securities and Exchange Commission in December, indicating its pursuit of one billion dollars in funding from equity investors.

As indicated in the filing, it had secured one hundred and thirty-five million dollars toward its target. On X, Musk refuted a statement in a January Bloomberg report claiming investors had committed to providing his company with five hundred million dollars and labeled it as “fake news.”