Elon Musk’s xAI Nears $120 Billion Valuation in New Funding Talks

Elon Musk’s artificial intelligence startup, xAI, is reportedly engaged in initial discussions to secure new funding that could value the company at approximately $120 billion, a significant increase from its $80 billion valuation just over a month ago, according to sources familiar with the matter.

These negotiations remain at an early phase, and the final valuation of xAI could fluctuate as talks continue. Investors have proposed an infusion of $20 billion into the company, though this amount is subject to change.

This potential funding round follows a major capital raise by OpenAI, the San Francisco-based creator of ChatGPT, which recently completed a financing round placing its valuation at $300 billion. OpenAI’s launch of ChatGPT in late 2022 ignited significant interest and investment across the AI sector, benefiting companies like xAI.

xAI has become increasingly integrated with X, Musk’s social media platform. In March, Musk announced that ownership of X had been transferred to xAI in an all-stock deal valuing xAI at $80 billion and X at $33 billion. Prior to this, xAI’s valuation in a December funding round stood at around $40 billion.

The chatbot Grok, developed by xAI, is trained on data generated by X users and is accessible through the X platform. Representatives from X have informed investors that a portion of the social media company’s revenue is derived from xAI.

Investor enthusiasm for AI ventures tempered towards the end of last year as several prominent startups were absorbed by major technology companies such as Google and Amazon. Nevertheless, xAI and OpenAI remain among the few independent entities actively seeking substantial funding to advance leading-edge AI technologies.

Elon Musk has not responded to requests for comment regarding xAI’s funding discussions.

Musk was a co-founder of OpenAI in 2015 alongside entrepreneur Sam Altman and others but departed about two years later following disagreements over the organization’s direction, which at the time was structured as a nonprofit.

Following Musk’s exit, OpenAI transitioned into a for-profit entity under Altman’s leadership to enable it to raise substantial capital necessary for developing AI technologies. These systems require extensive computational resources and vast amounts of data to learn and improve.

After the release of ChatGPT in 2022, Musk launched xAI with the aim of developing similar AI technologies. Around the same period, he filed a lawsuit against OpenAI, alleging that the organization and two of its founders prioritized commercial interests over public benefit, violating the founding agreement. Although Musk initially dropped the lawsuit, he revived it in federal court in August.