Elon Musk's ambitious venture into the realm of generative AI, xAI, is making waves as it embarks on a monumental $6 billion Series B fundraising round. This move positions xAI as a formidable contender against the giants of the industry—OpenAI, Microsoft, Google, and Meta. According to Musk, the round is based on an impressive pre-money valuation of $18 billion. "Stay tuned for more announcements in the coming weeks," Musk teased on X (formerly Twitter).
This massive fundraising effort comes less than a year after xAI's inception in July 2023. The company has announced that a host of prominent global investors are expected to participate, including the likes of Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital, and Fidelity. Additionally, Saudi Prince Al-Waleed bin Talal, one of the world's most influential investors, and his Kingdom Holding fund—also a minority shareholder in X—are on board.
Over the past year, xAI has made remarkable strides, notably launching its first large language model, Grok-1. The name Grok is inspired by Robert Heinlein's iconic novel "Stranger in a Strange Land," where the term means to understand something so deeply that it becomes part of you. Building on this, the company has also introduced Grok-1.5, which boasts enhanced capabilities for grasping complex contexts and understanding images.
"xAI has made significant strides over the past year," the company stated on their website. "From the announcement of the company in July 2023, to the release of Grok-1 on X in November, to the recent announcements of the improved Grok-1.5 model with long context capability, to Grok-1.5V with image understanding, xAI’s model capabilities have improved rapidly. With the open-source release of Grok-1, xAI has opened doors for advancements in various applications, optimizations, and extensions of the model.
xAI will continue on this steep trajectory of progress over the coming months, with multiple exciting technology updates and products soon to be announced. The funds from the round will be used to take the company’s first products to market, build advanced infrastructure, and accelerate the research and development of future technologies."
This fundraising effort marks another significant chapter in the ongoing arms race within the GenAI sector, which has seen billions of dollars poured into various companies and ventures over the past eighteen months. OpenAI has amassed $13 billion from Microsoft, while Anthropic has raised $6 billion. Much of this investment goes towards acquiring the necessary computing resources for training and operating GenAI models, particularly NVIDIA AI processors, which are highly coveted and in short supply.
"Everyone sees AI as the future, leading to an unprecedented level of investment until proven otherwise," remarked Alex Clayton, a general partner at Meritech Capital, in an interview with the Wall Street Journal. "The challenge lies in the uncertainty of what these business models will look like at scale. We have theories, but clarity is still elusive."
Musk, a co-founder of OpenAI in 2015, parted ways with the company a few years later. Reports suggest his exit stemmed from a disagreement with CEO Sam Altman over control of the company. Musk's departure has since fueled tensions, culminating in a lawsuit against OpenAI in March. Musk accused the company of abandoning its original mission of developing AI for the benefit of humanity, prioritizing profit over safety and caution.
While Musk's claims hold some weight—evidenced by the recent departure of key OpenAI executives Ilya Sutskever and Jan Leike and the disbandment of their team focused on ensuring AI systems operate for humanity's benefit—experts believe the lawsuit lacks substantial merit. OpenAI contends that Musk's lawsuit is driven by regret over his current non-involvement. "We believe the lawsuit stems from Musk's frustration at not being part of the company's current success," wrote Jason Kwan, Vice President of Strategy, in a memo to employees.
Since its founding, xAI has integrated its operations closely with those of X. The startup enjoys exclusive access to the entire archive of posts from the social network for training its models, raising concerns about potential biases given the volume of hate speech, racism, anti-Semitism, and incitement on X since Musk's acquisition in late 2022. Earlier this month, it was reported that X plans to start publishing news summaries using the Grok chatbot. These summaries, based on user posts rather than third-party news sources, will be available exclusively to premium users on the platform.