Elon Musk’s xAI closes in on $6 billion as AI race heats up

Elon Musk’s artificial intelligence (AI) start-up, xAI, looks like it has some serious venture capital money behind it with the commitment of Sequoia Capital, to invest in the company.

Musk launched xAI in 2023 with lofty ideals and plans to work on existential problems like understanding the nature of the universe.

In his efforts to raise up to $6 billion for his fledgling company, the 52-year-old billionaire has approached investors who previously supported his acquisition of Twitter (now X) in 2022. The latest funding round could mean that xAI is valued at $18 billion, reports the Financial Times on Thursday (Apr 25).

Sequoia, which invested $800 million in Twitter, has confirmed its intention to invest in xAI, although the exact amount remains undisclosed.

Elon Musk’s xAI levels up for the AI race

Sequoia’s support for xAI comes as no surprise, the Silicon Valley investment firm is a long-time collaborator and backer of Musk, including The Boring Company and SpaceX. Roelof Botha, Sequoia’s current boss, was hired by fellow South African, Musk at PayPal in 2000.

Musk’s xAI faces intense competition from rival AI companies in this red-hot emerging market sector. OpenAI and Anthropic are fellow start-ups making big waves and existing tech giants like Meta (who this week announced a significant increase in AI spending) and Google.

To keep his company in the race, the X owner has been acquiring the necessary chips to train AI models and hiring engineers and researchers, some of whom have come from his other company, electric car maker Tesla. The capital investment from Sequoia and other investors will help accelerate the development of xAI’s chatbot, Grok, bringing it closer to the performance of its rivals.

Musk’s involvement in the AI industry is not without controversy. He co-founded OpenAI in 2015 but left its board in 2018 due to disagreements with CEO Sam Altman over the direction of research. Recently, Musk sued OpenAI and Altman, claiming they had compromised the start-up’s original mission of building AI systems for the benefit of humanity, a case that OpenAI has described as “frivolous” and sought to dismiss.