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Elon Musk’s AI Startup xAI Seeks Up to $4 Billion in Funding, Aiming for $18 Billion Valuation

Tech entrepreneur Elon Musk is currently seeking to secure up to $4 billion in funding for his new artificial intelligence (AI) startup, xAI, which developed the AI chatbot known as Grok.

To facilitate this, Musk is offering selected investors the opportunity to join funding rounds via special purpose vehicles (SPVs), as stated in a recent email circulated among potential contributors.

SPVs are investment tools that allow various investors, including venture capital firms and individual investors, to pool resources into a single entity.

Although this method provides an organized way to invest, it comes with initial fees of up to 5% in addition to management fees and interest, as reported.

Musk’s fundraising target ranges between $3 billion and $4 billion, aiming for a post-deal company valuation of $18 billion.

The email elaborated that the funds are expected to be raised “in the next 2–3 weeks on a first-come, first-served basis.”

Founded by Musk in March 2023, xAI was officially launched in July of the same year and is based in the San Francisco Bay Area.

The company’s mission is ambitiously described as “understanding the true nature of the universe.”

Its first product, the X-linked chatbot Grok, was released in November, boasting capabilities surpassing those of OpenAI’s ChatGPT, according to the firm.

In addition to Musk’s renowned success with Tesla, the email to investors highlighted the AI model’s training on data sourced from Musk’s X microblogging network as a potential selling point.

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Mario Nawfal, an entrepreneur and angel investor, has voiced his perspective on the current surge in AI investments, saying, “concerns about an AI bubble grow amid soaring valuations and high development costs.”

xAI also focuses on internal capabilities, employing AI tutors from diverse fields to generate and refine high-quality data for model training and evaluation, per information on the company’s website.

In a significant move, Musk announced in March that xAI would make its AI chatbot open-source, positioning it as a contender against the proprietary models like OpenAI’s ChatGPT.

Despite its ambitious valuation and technological advances, xAI remains relatively small, with only 10 full-time engineers and an operational range of 5,000 to 10,000 GPUs.

When Cointelegraph sought more details from xAI, the company did not provide an immediate response.

The AI chatbot market is competitive, with Grok vying against other products like OpenAI’s ChatGPT, Antropic’s Claude, Microsoft’s Copilot, Google’s Gemini, and Meta AI from the company formerly known as Facebook.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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