Elon Musk’s artificial intelligence startup, xAI, is reportedly in talks to raise up to $6 billion from global investors, including those in Hong Kong, to compete with Microsoft-backed OpenAI. Musk is said to have approached wealthy individuals and investors around the world in recent weeks, hoping to secure funding for his ambitious venture.
According to FT sources familiar with the matter, negotiations have included discussions with family offices in Hong Kong, despite potential political sensitivities arising from increased geopolitical tensions. Musk is reportedly seeking up to $6 billion in new equity capital, with xAI valued at $20 billion. However, these figures are still under negotiation, and the desire of investors for such huge amounts is being seen.
Musk’s reach is said to go beyond Hong Kong, with a focus on sovereign wealth funds in the Middle East, as well as Japanese and Korean investors. Although Musk has denied recent reports of xAI fundraising, document filings show the company’s capital-raising activities. In response to inquiries, Musk stated on X (Twitter) that “xAI is not raising capital, and I have had no conversations with anyone in this regard.” Morgan Stanley is co-coordinating the fundraising efforts, which was also involved in financing Musk’s leveraged buyout of X in 2022, one of the sources said FT but the bank has declined information as of now.
xAI Musk’s AI venture, based in San Francisco, debuted its first product in December: a chatbot named Grok that was trained using social media posts on X for paid members to provide more up-to-date responses. OpenAI, xAI’s rival, has raised approximately $13 billion from Microsoft alone, highlighting the competitive nature of the AI sector. Elon Musk, a founding investor in OpenAI, launched xAI in July 2023, citing disagreements with the company’s approach and a lack of emphasis on safety measures. The financing details for xAI are unknown, except for Musk’s November post on X, which stated that current shareholders in X would “own 25 percent” of the xAI company.
Investors of xAI, which is involved in Musk’s $44 billion takeover of X (formerly Twitter), include Oracle CEO Larry Ellison, Sequoia Capital, Andreessen Horowitz, Fidelity Management, and Saudi Prince Alwaleed bin Talal. Fidelity recently reduced its investment in X by roughly 70%, valuing the company at $12.5 billion, as reported by the Financial Times.