Elon Musk’s xAI may have secured funding at $24Bn valuation from Andreessen, Lightspeed, Sequoia & Tribe

Elon Musk’s AI startup, X.AI Corp., is on track to finalize a funding round in June that could value the company at over $24 billion, including the latest injection of capital, according to a source familiar with the deal.

Originally, the company aimed to conclude a financing round of approximately $6 billion earlier this month. However, the final close has been delayed, and the company is now seeking to raise as much as $6.5 billion. Over the next few weeks, efforts will be made to reach closer to that target, as per the source, who preferred to remain anonymous due to the confidential nature of the information.

Elon Musk’s xAI has attracted significant support from major Silicon Valley venture capital firms, including Lightspeed Venture Partners, Andreessen Horowitz, Sequoia Capital, and Tribe Capital.

According to sources familiar with the negotiations, these investors have committed to participating in xAI’s latest financing, with Musk aiming to raise nearly $6 billion. However, one investor involved in the round, told the Financial Times that Musk is still a few hundred million dollars short of his target.

Musk’s push for funding comes as he seeks to bolster xAI’s position in the competitive AI landscape, where market leaders like OpenAI, Anthropic, and Google have already introduced more advanced generative AI models.

Musk’s pitch to investors hinges on xAI’s potential to leverage its ties with other companies under his leadership, which could provide technology, data, and early revenue as customers of the startup.

The new funding round would result in a “post-money” valuation of $24 billion for xAI, facilitating the development of new iterations of its Grok chatbot. Musk co-founded OpenAI before departing in 2018 due to disagreements with then-CEO Sam Altman regarding the company’s research direction.

Musk subsequently sued OpenAI and Altman, alleging a deviation from the startup’s original mission, a claim that OpenAI dismissed as “frivolous.”

In his pursuit of artificial general intelligence, Musk has pledged to be more transparent than his rivals, criticizing existing models for what he perceives as excessive political correctness. While some investors are convinced by Musk’s vision, they caution that xAI trails behind its competitors and would require substantial investment in chips and infrastructure to catch up.

During the fundraising process, investors like Sequoia and Andreessen, which have previously backed Musk’s ventures including X and SpaceX, were given priority to acquire up to 25 per cent of xAI shares. Additionally, much of the funding round was facilitated through banks and special purpose vehicles, including sources outside the US.

However, concerns have been raised about the inclusivity of the fundraising process, with some investors feeling marginalized if they had previously raised questions about issues at Musk’s other ventures. Despite these concerns, xAI continues to attract significant interest from investors worldwide, including sovereign wealth funds, family offices, and retail investors in regions like the Middle East and Hong Kong.

(With inputs from agencies)