Musk's AI Venture xAI Secures Half of its $1 Billion Funding Goal

JJohn January 20, 2024 7:01 AM

Elon Musk's AI startup, xAI, has secured $500 million in investment commitments, halfway to its ambitious $1 billion goal. The firm aims to surpass OpenAI, another AI company Musk co-founded and later left.

xAI Nears Halfway Point in Funding Drive

In a major stride towards its funding goal, Elon Musk's artificial intelligence firm, xAI, has collected investment commitments worth $500 million. The company is on a mission to raise $1 billion in funding, and this midpoint achievement is a significant step towards that target. Despite the undisclosed and potentially shifting terms of the valuation, which reportedly falls between $15 billion and $20 billion, the company's progress is nothing short of commendable.

xAI: Musk's Answer to OpenAI

Launched by Musk just last year, xAI was envisioned as a rival to Open AI—a company he also co-founded but later chose to leave due to disagreements on its business model. Musk's new venture seeks to chart its own course in the AI tech landscape, representing a different approach to profiting from the technology compared to his previous endeavor.

xAI has developed a unique product named Grok, an AI chatbot, by harnessing the power of social media data. Grok's development specifically leverages posts from X, the social network previously known as Twitter and now owned by Musk. This approach gives the chatbot unparalleled access to up-to-date data, allowing it to generate more accurate responses compared to its counterparts.

X Investors to Own a Slice of xAI

In a novel approach to investment, Musk announced last November that equity investors in X will have a 25% stake in xAI. Essentially, this means that these investors are invited to match at least 25% of their X investment in xAI. For instance, investors who pumped $10 billion into X are encouraged to invest at least $2.5 billion in xAI.

Certain parties are considering a rather unconventional option of gaining computing power instead of, or in addition to, xAI equity shares. This alternative would particularly benefit venture firms' portfolio companies that require intensive data processing capabilities to develop new AI products.

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