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Elon Musk’s xAI Secures $6 Billion To Compete With ChatGPT

Jimmy Aki
Last updated: | 2 min read
Elon Musk

Elon Musk’s AI startup, xAI, successfully raised $6 billion in a Series B funding round on May 26. The latest Series B round included participation from Vy Capital, Andreessen Horowitz, Sequoia Capital, and Saudi billionaire Prince Alwaleed Bin Talal.

According to an official blog post from the xAI startup, the capital raise will bring xAI’s first products to market, build advanced infrastructure, and accelerate research and development of future technologies. Elon Musk also hinted at more announcements in the following weeks.

Elon Musk Aims to Guide xAI to Stardom Amidst Failed OpenAI Idea

The funding round boosted xAI’s value to $24 billion, a major increase from its previous value of $18 billion just 11 months after its launch in July 2023.

In sharp comparison, OpenAI, the creator of ChatGPT, is valued at $80 billion. Enthusiasts believe the valuation is fair as OpenAI was founded in December 2015, an eight-year head start over xAI.

Musk has avidly supported AI technology, which led him to co-found ChatGPT maker OpenAI. His involvement was short-lived following a fallout with the management team, however.

In March 2024, Musk sued OpenAI and its co-founder Sam Altman, accusing them of betraying the nonprofit’s mission statement and becoming a “closed-source de facto subsidiary” of Microsoft.

According to the lawsuit, Musk donated over $44 million to OpenAI between 2016 and September 2020 and was its largest contributor for several years.

Although he left OpenAI’s board in 2018, he was offered a stake in the for-profit arm but declined on principle.

Elon Musk Spearheaded Grok, the ChatGPT Challenger

Musk founded xAI in July 2023 and went on to release its ChatGPT-rival Grok 1.0 model in November 2023.

Grok is a generative AI model that was developed over several months on a cluster comprising “tens of thousands” of GPUs. The training of ChatGPT challenger involved sourcing data from the web up to the third quarter of 2023, complemented by feedback from human assistants that xAI refers to as “AI tutors.”

The model was made available through a chatbot to X Premium and Premium+ users. In March 2024, the company announced the Grok 1.5 model –a measurable upgrade to Grok-1. The chatbot was also made available to Premium users on X.

Speaking at Viva Tech Paris 2024, Musk acknowledged that xAI, a new company, needs to make considerable progress before it can compete with industry leaders like Google DeepMind and OpenAI.

Musk expressed his optimism about Grok’s rapid development and future competitiveness in the AI landscape.