Elon Musk's xAI Nears $6 Billion Funding Round Led by Sequoia Capital

Elon Musk's xAI Nears $6 Billion Funding Round Led by Sequoia Capital

Elon Musk's AI venture, xAI, is close to securing a substantial $6 billion funding round at an $18 billion valuation, as reported by The Information. The investment, expected to close within the next two weeks, is being led by Sequoia Capital, a prominent venture capital firm known for its successful bets on transformative technologies.

The fresh capital injection will bolster xAI's efforts to develop its chatbot, Grok, into a formidable rival to OpenAI's ChatGPT. Musk launched xAI in early 2023, and Grok was released to premium subscribers on Musk's social network, X (formerly Twitter), last December.

According to Musk, xAI is currently training the second generation of Grok on 20,000 NVIDIA H100 GPUs, the state-of-the-art chips powering the most advanced AI models. In a recent Twitter Spaces session, Musk revealed that the company ultimately aims to scale up to 100,000 GPUs to train Grok 3.0.

This funding round is double the size of the figures xAI was discussing with investors earlier this year, as previously reported by The Wall Street Journal and Financial Times. It follows a separate $1 billion round primarily backed by Musk himself, which was disclosed in December.

The investment showcases the willingness of top-tier investors to diversify their portfolios within the rapidly evolving AI sector. Sequoia Capital, for instance, began investing in OpenAI in 2021 at a $20 billion valuation but opted out of the latest tender offer, which valued the company at $86 billion, or about 54 times its annualized revenue as of December.

Sequoia's involvement in xAI is not surprising, given its history of backing Musk's other ventures, such as SpaceX and the $44 billion buyout of Twitter. While the identities of other participants in the current round remain undisclosed, Musk's ventures have attracted investments from firms like Valor Equity Partners and Vy Capital in the past.

As xAI continues to attract top engineering talent, including several key hires from Tesla in recent months, the company appears well-positioned to accelerate its development efforts and compete in the increasingly crowded AI landscape.

The latest funding round demonstrates investors' willingness to spread their bets among competitors in the AI sector, where valuations have skyrocketed. It remains to be seen how this substantial investment will shape xAI's development and its position in the rapidly evolving AI industry.

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