One reliable source close to the deal says that xAI, Elon Musk’s 10-month-old AI rival to OpenAI, is raising $6 billion at a pre-money value of $18 billion. If the terms of the deal don’t change, the deal should go through in the next few weeks. Investors will get a quarter of the company.
The terms of the deal have already been changed once. Late last week, Jared Birchall, who runs Musk’s family office, told potential investors that xAI was raising $3 billion at a $15 billion value before the money was raised. Because so many people wanted to get in on the deal, those numbers were changed right away.
Our source says, “We all got an email that basically said, ‘It’s now $6B on $18B, and don’t fret because many more people want to join.'”
Investors who have been trying for months to get in on the deal didn’t seem to mind. The round is being led by Sequoia Capital and Future Ventures, a venture capital fund co-founded by Musk’s close friend Steve Jurvetson.
Valor Equity Partners and Gigafund are also likely to be there because the owners of those companies are close friends with Elon Musk, who is known for mixing the personal and the private. (Attempts to get in touch with these investors were not answered; xAI does not have a press role.)
He is on the board of SpaceX and until 2020 was a director at Tesla. Founders Fund co-founder Luke Nosek and investor Peter Thiel were the first startup capitalists to give money to SpaceX. Nosek has been on the board of directors of SpaceX since then. Antonio Gracias, founder of Valor, was one of the first people to invest in Tesla. Like Jurveston, he used to be a director of Tesla and is now on the board of SpaceX.
Our source said that because of how the promises were made, it’s not clear to all the other investors who is in the deal. “On the other end of the Zoom call, there are only you, Elon, Jared, and some engineers at a table.”
This Person Says The Pitch Is Interesting
The marketing materials for xAI already make it clear that the company’s goal is to connect the digital and physical worlds. However, many people may not know that Musk plans to do this by using training data from all of his companies, such as Tesla, SpaceX, his tunneling company, Boring Company, and Neuralink, which makes computer interfaces that can be implanted in people’s brains.
X is, of course, another business that Musk owns. For a fee, the social media site has already added xAI’s robot Grok, which has been around for a few months. But Musk tells investors that’s only one part of what will grow into a huge virtual cycle.
As an example, X is both a user of Grok and a huge distributor for Grok. The pitch says that eventually, data from Musk’s other businesses will be fed into Grok. This will help it learn how to control the real world in what could be an infinite number of ways, starting with cars that drive themselves.
The humanoid robot Optimus from Tesla is another potential winner. Musk told investors earlier this week that Optimus will be able to do work in Tesla plants by the end of this year. The robot is still in the lab today. If Musk’s big picture comes true, these smart helpers may be able to do more and faster than anyone thought possible, even if that deadline turns out to be too short.
For now, X itself may be the first thing to benefit from xAI’s growing popularity. In the 1.5 years since Musk bought the platform, it has turned into a toxic waste dump and lost a lot of value. However, Musk made sure that X has a share in xAI, so it will benefit from any gains the AI company makes.
What this all means for OpenAI, which last year became the startup with the fastest growth, is still unknown. Now that OpenAI’s ChatGPT chatbot is out, the business has been on the rise, and Musk has been after it.
Musk helped start OpenAI in 2015, but he quit its board in 2018 because he didn’t agree with the company’s direction. OpenAI started out as a nonprofit, but it later turned into a for-profit business. Since then, Musk has yelled at OpenAI partner Sam Altman in public and made fun of the name, suggesting that it should be called ClosedAI instead.
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Musk made it possible for anyone to download and change the architecture of xAI’s first chatbot, “Grok-1,” last month. This was another step in his ongoing campaign to set his work apart from OpenAI, which has not shared its secret sauce with the world and is now being sued by Musk.
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