xAI, Elon Musk’s OpenAI rival, is closing on $6B in funding and X, his social network, is already one of its shareholders

xAI, Elon Musk’s 10-month rival to AI phenomenon OpenAI, is raising $6 billion at a pre-money valuation of $18 billion, according to a reliable source close to the deal. The deal – which would give investors a quarter of the company – is expected to be finalized in the coming weeks, unless the terms of the deal change.

The terms of the agreement have already changed once. Last weekend, Jared Birchall, who heads Musk’s family office, told potential investors that xAI was raising $3 billion at a pre-money valuation of $15 billion. Given the number of investors clamoring to participate in the operation, these figures were quickly adjusted.

Our source says: “We all got an email that basically said, ‘It’s now $6 billion out of $18 billion, and don’t complain because a lot of other people want in.’ »

Investors who have been lobbying for months to participate in the operation are paying little attention. Sequoia Capital and Future Ventures, the venture capital fund co-founded by Musk’s longtime friend Steve Jurvetson, are participating in the funding round.

Other participants likely include Valor Equity Partners and Gigafund, whose founders are also part of Musk’s inner circle, which mixes the personal and private. (Outreach efforts to these investors have gone unanswered; xAI has no press function.)

Jurvetson serves on the board of directors of SpaceX and was a director of Tesla until 2020. Gigafund founder Luke Nosek, who previously co-founded Founders Fund with investor Peter Thiel, was the first venture capitalist to write a check to SpaceX and served on its board of directors. Since. Valor founder Antonio Gracias was among the first investors in Tesla; like Jurveston, he is a former director of Tesla and also serves on the board of directors of SpaceX.

Our source said all other investors are unclear who is in the deal because of how the commitments were obtained. “It’s a Zoom call and it’s just you, Elon and Jared (on the other side) at a table with engineers.”

The pitch, this individual says, is captivating.

xAI’s marketing literature already makes it clear that the company’s ambition is to connect the digital and physical worlds, but it may not be widely understood that Musk plans to do this by mining data from each of his companies , including Tesla, SpaceX, its tunnel boring machine. Outfit Boring Company and Neuralink, which develops computer interfaces that can be implanted into the human brain.

Of course, another Musk company is X. The social media platform has already integrated Grok, xAI’s months-old chatbot, into the platform as a paid add-on.

This is just one piece of what Musk is telling investors that will become a sprawling virtual cycle. With Grok, for example, X is both a client and provides massive distribution to Grok. Eventually (the talk is), Grok will receive data from Musk’s other companies, helping him master the physical world in potentially infinite ways, starting with truly self-driving cars.

Another likely beneficiary would be Tesla’s humanoid robot, Optimus. Today, the Tesla robot is still in the lab, but Musk told analysts in a call earlier this week that Optimus would be able to perform tasks in Tesla factories by the end of This year. Even if that timeline proves ambitious, these nifty assistants might be able to do more — and faster than previously imagined — if Musk’s overall vision comes to fruition.

Meanwhile, the most immediate beneficiary of xAI’s burgeoning momentum might be X itself. Although the platform had become something of a toxic cesspool in the year and a half since Musk bought it and subsequently lost much of its value, Musk had already ensured that that X owns a stake in xAI, so he will receive all the benefits of the AI ​​business. see.

Musk has had OpenAI in his sights since the company’s rise began in earnest early last year, shortly after the release of its popular chatbot ChatGPT.

Musk co-founded OpenAI in 2015 and later set aside disagreements over the direction of the company, which began life as a nonprofit before becoming a for-profit entity. Musk has since publicly harangued OpenAI co-founder Sam Altman and mocked the brand, suggesting it should instead be called himself. ClosedAI.

Last month, when Musk made the architecture of xAI’s first chatbot, “Grok-1,” open source, meaning anyone can now download and modify it, the move was part of his ongoing campaign to distinguish his efforts from OpenAI, which has not shared its secret sauce with the world, and which Musk is now suing against.

As first reported today in The Information, Musk publicly stated this month that xAI is currently training the second generation of Grok on 20,000 Nvidia H100s, which are the chips currently powering the most popular AI models. advances.