One of Tesla chief Elon Musk’s other companies is eyeing a $20 billion valuation

Elon Musk’s artificial intelligence startup, xAI, is in talks to raise $6 billion in funding at a valuation of $20 billion, according to new reporting from the Financial Times

Sources told FT that Musk has been looking to raise money for xAI from global investors in recent weeks, reportedly speaking to investors in Hong Kong, Japan, South Korea and wealth funds in the Middle East. 

People familiar with the matter added that the negotiations are still ongoing.

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Morgan Stanley, according to the report, is coordinating the fundraising round. The investment bank did not immediately respond to TheStreet’s request for comment. 

This comes about a week after Bloomberg reported that xAI had secured $500 million in funding, a report that Musk denied in a post on X as being “simply not accurate.” 

xAI, according to a December SEC filing, is looking to raise $1 billion in funding; as of Dec. 5, the company had raised $135 million of that goal. This is indicative of the sheer cost of compute needed for AI companies; a single Nvidia  (NVDA) – Get Free Report H100 chip carries a roughly $30,000 price tag

Competitors in the space have been building out massive arrays of chips; Meta  (META) – Get Free Report recently announced that it plans to have around 600,000 equivalents of H100 chips by the end of the year, an array that could cost about $18 billion. 

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Musk and xAI

Musk, who has often spouted extinction-level fears of AI gone terribly wrong, launched xAI in 2023 just a few months after he signed a letter calling for a pause in the development of more powerful AI systems. 

Musk’s intention with xAI is to build a safer AI system that is both “curious” and “truth-seeking,” a combination that, according to the billionaire, will ensure the protection of human civilization. 

“I think to a superintelligence, humanity is much more interesting than not humanity,” he said in July, adding that, so long as an AI model is designed to be naturally curious, it wouldn’t attempt to destroy something like humanity that is, as he put it, so “interesting.” 

Experts have taken issue with this perspective on AI safety, citing the dangers of anthropomorphizing AI, which is not sentient. Researchers, who have also pointed to the necessity of guardrails and regulations to ensure AI safety, have also said that such existential risks of an artificial superintelligence destroying human civilization border on quasi-religious faith, and have no basis in science

xAI in November launched its first product, a chatbot challenger to ChatGPT called Grok. The 30-billion parameter Large Language Model (LLM) was trained in part on data from X and was designed to be sarcastic. 

Experts told TheStreet at the time that the model doesn’t seem demonstrably different from other available models, with Musk’s language around it another entry in a long list of dangerous hype-building of AI systems

Musk has been somewhat prominent in the AI space long before he started xAI. The billionaire played a key role in starting OpenAI, the startup responsible for ChatGPT, in 2015, alongside Sam Altman, who now serves as the company’s CEO. 

OpenAI began initially as a nonprofit research lab. 

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Not long after its start, Musk reportedly attempted to take control over the company in a bid that was rebuffed by OpenAI’s other founders; Musk in 2018 resigned from the board after only investing $100 million of the $1 billion promised, citing a conflict of interest with his work at Tesla  (TSLA) – Get Free Report

With Musk and his billions off the table, OpenAI transitioned into a hybridized “capped-profit” company and has since received $13 billion in funding from Microsoft  (MSFT) – Get Free Report and a valuation of at least $86 billion. 

Musk has been publicly critical of OpenAI since leaving the board, specifically of the relationship the startup has with Microsoft. 

“OpenAI was created as an open source (which is why I named it ‘Open’ AI), non-profit company to serve as a counterweight to Google, but now it has become a closed source, maximum-profit company effectively controlled by Microsoft,” Musk said last year. “Not what I intended at all.”

Contact Ian with AI stories via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.

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