The World’s richest man Elon Musk’s artificial intelligence company, xAI, is negotiating with investors for a funding round that could push its valuation to around $40 billion.
This substantial valuation increase comes as the tech sector’s race to build advanced generative AI technology intensifies, Wall Street Journal first reported.
xAI was last valued at $24 billion after securing $6 billion in funding in the spring. The upcoming funding round aims to raise several billion dollars, potentially boosting xAI’s valuation to the targeted $40 billion mark.
The talks are still in their early stages, meaning the valuation or terms of the deal could change, and xAI has not provided a formal comment.
Musk founded xAI about 18 months ago after recognizing the success of generative AI tools like ChatGPT, a product of OpenAI—an AI firm Musk co-founded in 2015 before leaving in 2018.
Since its inception, xAI has operated in catch-up mode, introducing its Grok chatbot on Musk’s social media platform, X, and leveraging resources from his other ventures, including Tesla and SpaceX. The company has raised concerns about resource-sharing across Musk’s businesses, with some Tesla shareholders suing to prevent Tesla assets from being diverted to xAI.
What we know
One of xAI’s major strengths is its advanced data center in Memphis, Tennessee, where it recently began training the latest iterations of its Grok model.
This facility, which Musk plans to expand from 100,000 GPUs to 200,000, has been praised for its impressive speed. The large-scale computing capacity of the Memphis data center enables xAI to train AI models faster than most competitors.
Silicon Valley’s major AI players, including OpenAI, Google, and Meta, are all rapidly raising funds to expand their AI capabilities. OpenAI recently raised $6.6 billion, reaching a valuation of $157 billion—currently the highest in the AI sector. Musk’s rivalry with OpenAI has deepened, with Musk accusing his former company of prioritizing profit over public good, a claim OpenAI disputes.
Background
xAI’s Grok model powers a chatbot that is exclusively available on X Premium. The company has also released a developer tool that enables broader use of Grok, diversifying its revenue stream. Despite its rapid progress, xAI has faced backlash over Grok’s image-generation tool, which allowed users to create images of specific public figures—an option not available in competing AI products.
With its $40 billion valuation target, xAI is set to secure a position as one of the AI sector’s top contenders.
