Less than a year after its launch, Elon Musk’s xAI is $6 billion richer, thanks to a group of investors that put money into the generative AI company’s Series B funding.
According to an announcement from xAI over the weekend, participants in the funding round include Valor Equity Partners, Andreessen Horowitz, Sequoia Capital, Fidelity Manage, Vy Capital and Prince Alwaleed Gin Talal and Kingdom Holding of Saudi Arabia.
The investments give Musk more money as he looks to compete with the likes of OpenAI, Microsoft and Google in the fast-growing and highly competitive generative AI space and reportedly push xAI’s valuation up to as much as $24 billion, far behind OpenAI’s number of $86 billion, but beyond that $18 billion of Anthropic, another rival that Musk hopes to compete with.
In announcing the funding round, xAI said it will use the money to bring its first products to market, build advanced infrastructure and accelerate its R&D efforts.
xAI boasted of its accomplishments over the past year in the wake of the company’s launch in July 2023. Those include the release in November of Grok-1, xAI’s large language model (LLM), the announcement in March of Grok-1.5 – which can understand long context and advanced reasoning – and Grok-1.5V a month later that comes with image understanding.
In March, Musk also announced that xAI would “open source Grok” by releasing the base model weights and measures as well as the network architecture of Grok-1, adding to the push in some corners to make generative AI platforms more open. Musk was a co-founder and early investor in OpenAI and now is suing the company, claiming it has violated its founding agreement to remain a nonprofit by partnering with Microsoft, which has invested more than $10 billion in the OpenAI.
xAI says its mission is to develop “advanced AI systems that are truthful, competent and maximally beneficial for all of humanity.” It’s also designed to be a more sarcastic chatbot than others on the market.
Building an AI Supercomputer
The investment announcement came about the same time that a report in The Information said that xAI is building an AI supercomputer that will be powered by Nvidia GPUs. Musk reportedly told investors that the supercomputer will power the next generation of the Grok chatbot.
Musk’s plan calls for having the system up and running by the fall of 2025, and xAI might partner with Oracle to make this happen. The supercomputer will use Nvidia’s H100 GPUs and will be four times the size of today’s largest GPU clusters, Musk reportedly told investors earlier this month.
It isn’t an inexpensive venture. The system will need 100,000 of the H100 GPUs, which are in short supply because of the high demand created by the explosion in generative AI since OpenAI launched ChatGPT in November 2022. Training the Grok 2 model used 20,000 H100s, Musk reportedly said earlier this year.
The H100s range in price from $25,000 to $40,000 per chip. The latest Blackwell GPUs from Nvidia, announced in March, could cost as much as $30,000 or $40,000 a piece.
Generative AI Driving the Conversation
AI – driven by innovation around generative AI – has become the focus of most IT companies. Nvidia in a savvy move more than a decade ago pinned its future on AI. Generative AI was the central focus of the Dell Technologies World 2024 conference last week in Las Vegas and will play a prominent role for other vendors in their shows throughout the rest of the year.
According to market research firm Statista, the global generative AI market is expected to grow from $66.62 billion this year to almost $207 billion by 2030. It doubled in size between 2022 and 2023.
The field right now is dominated by larger established companies like Microsoft, Amazon, Google and Meta and also includes some dominant pure-play companies, like OpenAI and Anthropic. There also are a range of partnerships and investments, such as Microsoft’s work with OpenAI.
In addition, both Amazon and Google are investing in Anthropic, with Amazon putting up as much as $4 billion. Google last year invested $300 million in the Claude chatbot.
