Elon Musk's xAI raises $6bn from investors including Saudi Arabia's Prince Alwaleed

The company plans to use the funds to bring its first products to market

Elon Musk said the company's pre-money valuation was $18 billion. Reuters
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Elon Musk's artificial intelligence start-up xAI has raised $6 billion in a series B funding round that includes participation from Saudi billionaire Prince Alwaleed bin Talal and his investment company Kingdom Holding, as it seeks to challenge rival OpenAI.

The round, which also saw investments from Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital and Fidelity Management & Research Company, will support the market launch of xAI's products, the company said on Monday.

“The funds from the round will be used to take xAI’s first products to market, build advanced infrastructure, and accelerate the research and development of future technologies,” it said.

It added that “multiple exciting technology updates and products” will soon be announced.

The company's valuation before the round was $18 billion, Mr Musk, owner of X, formerly Twitter, said in a post on the platform.

Saudi Arabia's Kingdom Holding, in conjunction with Prince Alwaleed, already holds a substantial investment position in X.

After an initial purchase of shares in 2011, both Kingdom Holding and its chairman increased their ownership in October 2015, jointly accounting for a major shareholding of X, according to the company’s website.

Mr Musk launched xAI in July last year amid the growing demand for generative AI to compete with dominant market player OpenAI, which is backed by Microsoft, with about $13 billion investment.

It released its Grok-1 generative AI platform in November, followed by the improved Grok-1.5 in March.

Benchmarks presented by xAI claim that Grok-1.5's performance is almost at par with generative AI's leading large language models, including Google's Gemini, Anthropic's Claude and OpenAI's GPT.

Grok is being positioned by the company as a “conversational AI for understanding the universe” – aligned with Mr Musk's mission statement when he announced in July last year that xAI was meant “to understand reality” and “the true nature of the universe”.

At the time of Grok-1's launch, Mr Musk also said that xAI would make Grok open source, doubling down on his offensive against ChatGPT maker OpenAI.

Mr Musk sued OpenAI and its chief executive Sam Altman in February, alleging it abandoned its initial non-profit mission and called the company “a lie”.

OpenAI soon retorted, saying that Mr Musk was just regretful he wasn't part of the company's current success.

The generative AI space is witnessing strong competition with OpenAI this month introducing GPT-4o, a “new flagship model that can reason across audio, vision and text in real time” that it hopes will attract more users to its platform.

GPT-4o is an updated version of the underlying large language model technology that powers ChatGPT.

Apple is also expected to join the generative AI race soon.

The company is widely expected to disclose its strategy for generative AI at its annual developers conference in early June.

Earlier this year, Apple chief executive Tim Cook said that the tech company was “currently investing significantly in this area”.

“We believe that will unlock transformative opportunities for users when it comes to productivity, problem-solving and more,” he said in February during an annual shareholder meeting.

Updated: May 27, 2024, 10:34 AM