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Elon Musk’s xAI Targets $3 Billion Funding Round

ByHuey Yee Ong

Apr 9, 2024
Elon Musk's xAI Targets $3 Billion Funding Round

Elon Musk’s xAI Targets $3 Billion Funding Round

Elon Musk’s artificial intelligence (AI) startup, xAI, is reportedly seeking a significant boost in funding, with talks underway to raise $3 billion.

The funding round, potentially valuing the company at $18 billion, involves investors close to Musk, including Steve Jurvetson and venture-capital firm Gigafund, as reported by the Wall Street Journal. Jurvetson, a SpaceX board member and former Tesla board member, and Gigafund co-founder Luke Nosek, associated with SpaceX and the “PayPal mafia” along with Musk, are among the prospective backers.

Founded by Musk last year, xAI emerged as a competitor to OpenAI, co-founded by Musk but later subject to legal disputes over its nonprofit mission. Musk started xAI after alleging that OpenAI was abandoning its original nonprofit mission.

The company introduced its chatbot named Grok in November, with an updated version released last month. This fundraising initiative, if successful, would bolster xAI’s position in the fiercely competitive AI market.

How Do xAI’s Competitors Stack Up?

While xAI aims to secure additional funding, its rivals, OpenAI and Anthropic, have already attracted significant investments.

  • OpenAI received a commitment of $13 billion from Microsoft.
  • Anthropic secured $6 billion in funding, backed by Google and Amazon.

Musk’s interest in securing funds for xAI has been evident, with reports in January suggesting a fundraising target of up to $6 billion, although Musk later denied these claims. Additionally, a regulatory filing from December revealed xAI’s intention to raise $1 billion, with approximately $135 million already secured.

Competing for the Best Minds in AI

The competition for AI talent is equally intense, with companies like Tesla and xAI competing for skilled engineers. Recent reports of Tesla engineers joining xAI prompted Musk to comment on the aggressive recruitment efforts of rivals like OpenAI, acknowledging substantial compensation offers made to attract talent. The demand for AI expertise is high, with only a limited pool of qualified individuals worldwide. Naveen Rao, head of generative AI at Databricks, highlighted the scarcity of individuals with expertise in training large language models and troubleshooting new AI platforms.

To attract and retain such talent, companies are offering lucrative compensation packages. OpenAI, for instance, offers a median salary of $925,000, including bonuses and equity. Despite these incentives, a significant portion of AI creators and heavy users express intentions to leave their current roles within the next three to six months, according to a McKinsey report. This trend is reflected in recent departures from companies like Meta, where high-level AI employees have left, despite efforts from CEO Mark Zuckerberg to persuade them to stay.

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Featured Image courtesy of GONZALO FUENTES/REUTERS

Huey Yee Ong

Hello, from one tech geek to another. Not your beloved TechCrunch writer, but a writer with an avid interest in the fast-paced tech scenes and all the latest tech mojo. I bring with me a unique take towards tech with a honed applied psychology perspective to make tech news digestible. In other words, I deliver tech news that is easy to read.

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