Elon Musk’s AI Company Aims to Secure Up to $6 Billion in Funding to Compete with OpenAI

(Reuters) – Elon Musk’s artificial intelligence start-up XAI is in talks to raise up to $6 billion at a proposed valuation of $20 billion, the Financial Times reported on Friday, as the billionaire entrepreneur plans to mount a challenge to OpenAI.

The start-up has been in talks with family offices in Hong Kong and is targeting Middle Eastern sovereign wealth funds for funding, according to the report, citing several people familiar with the matter.

The AI race has heated up with several investors signing big checks for startups looking to capitalize on Silicon Valley’s attention over the past year.

The $6 billion fundraising would be much higher than the $1 billion target XAI had set last month with the US Securities and Exchange Commission.

At $20 billion, xAI’s valuation would be a fraction of OpenAI’s, but in line with some other peers such as Google-backed Anthropic.

The Financial Times reports that Musk has turned to investors in Japan and South Korea for the latest round of fundraising. His office did not immediately respond to Reuters’ request for comment.

According to the report, Morgan Stanley is coordinating the fundraising. The bank was one of several that helped finance Musk-owned social media platform X, formerly known as Twitter.

Musk denied a report last week that XAI had received $500 million in commitments from investors to reach its $1 billion funding goal.

Tesla’s CEO has been vocal about his plans to build a safer artificial intelligence. Musk co-founded OpenAI in 2015, but resigned from its board in 2018.

Last year, XAI launched “Grok”, a chatbot that competes against OpenAI’s ChatGPT.

Musk also warned against developing artificial intelligence and robotics outside of Tesla earlier this month unless he gets more say in the electric vehicle maker. He said he would be uncomfortable building Tesla into an AI leader unless he had 25 percent of the voting power.

Thanks to ChatGPT’s popularity, the AI industry has been a rare bright spot in a lackluster start-up funding environment.

Anthropic and Microsoft-backed Inflection AI have also raised funds in recent months.