xAI raises $6B from Valor, a16z, and Sequoia

xAI, has raised $6 billion in a new funding round, it said today, as Musk shores up capital to aggressively compete with rivals including OpenAI, Microsoft, and Alphabet.

Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital, Fidelity, Prince Alwaleed Bin Talal and Kingdom Holding are among the backers who have invested in xAI’s Series B funding, the startup wrote in a blog post.

The funding confirms TechCrunch‘s reporting from April that xAI was looking to raise $6 billion at a pre-money valuation of $18 billion. At the time, TechCrunch also reported that Musk has seen to it that X, the social network he now owns and controls, also owns a stake in xAI so will benefit from whatever upside the AI outfit sees.

Musk is one of the earliest and highest-profile entrepreneurs in the AI space. Tesla, a car company he leads, is the top EV carmaker with self-driving technologies. He is also a co-founder of OpenAI, a startup in which he has invested tens of millions of dollars. Musk’s love for OpenAI has waned since: In March, he sued OpenAI and its co-founder Sam Altman for allegedly betraying its mission statement and becoming a “closed-source de facto subsidiary” of Microsoft. He has also accused Google of coding bias into its AI products.

After forming xAI year, Musk released its chatbot ChatGPT-rival Grok 1.0 model in November. Later, the company made the model available through a chatbot to Premium+ users — who pay $16 a month — on X. In April, the company released the new Grok 1.5 model and also allowed Premium users on X to access the chatbot. Additionally, the Musk-owned company previewed Grok’s multimodal capabilities in April. Earlier this year, the company open-sourced the Grok model but without any training code.

xAI plans to deploy the funds from the new financing round to take its first set of products to market, build advanced infrastructure, and accelerate the research and development of future technologies, it said in its new blog post. The company is likely to look for partnerships to introduce Grok to users beyond X.

The company — whose new backers also include individuals with whom Musk has close ties, including Ken Howery, a cofounder of PayPal and Founders Fund — claims that it aims to develop “truthful” AI systems. Still, as with other AI chatbots, Grok’s news summary feature on X is reported to hallucinate and generate misleading information.