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

xAI, a company that competes with Elon Musk’s 10-month-old AI genius OpenAI, has raised $6 billion at a pre-money valuation of $18 billion, according to a reliable source close to the deal. The deal will give investors a quarter of the company and is expected to close in the coming weeks, unless the terms of the deal change.

The trading conditions have already been changed once. As of last weekend, Jared Birchall, head of Musk’s family office, told prospective investors that xAI had raised $3 billion at a pre-money valuation of $15 billion. That number was quickly adjusted, given that many investors wanted to participate in the deal.

Our sources say: “We all got an email that basically said, ‘$18 billion is now $6 billion, don’t complain because a lot of other people want to participate.'”

Investors who have been lobbying for a deal for months are paying little mind. Sequoia Capital and Future Ventures, a venture fund co-founded by Musk’s longtime friend Steve Jurvetson, are participating in the round.

Other participants could include Valor Equity Partners and Gigafund, whose founders are also members of Mr. Musk’s inner circle, who is known for mixing business with private life. (Invitations to these investors were not returned. xAI does not have a press facility.)

Jurvetson is a member of SpaceX’s board of directors and served on Tesla’s board until 2020. Gigafund co-founder Luke Nosek, who previously co-founded Founders Fund with investor Peter Thiel, was the first venture investor to write a check for SpaceX and remains Serves as a director. That board ever since. Valor founder Antonio Gracias was one of Tesla’s early investors. Like Gerveston, he is a former Tesla board member and a SpaceX board member.

Our sources said that because of the way the commitments were obtained, it was not completely clear to all other investors participating in the deal. “This is a Zoom call, just you, Elon, and Jared.” [on the other side] At a table with some engineers. ”

This person says the pitch is appealing.

xAI’s marketing materials have already made it clear that the organization’s ambition is to connect the digital and physical worlds, but Mr. Musk has also said that it will bring in data from companies such as Tesla, SpaceX and Tunneling. It may not be well understood that this is the plan to make this happen. Boring Company and his company Neuralink, which develops computer interfaces that can be implanted into the human brain.

Of course, Mr. Musk’s other company is X. The social media platform already has his Grok, a chatbot that xAI has been developing for several months, built into the platform as a paid add-on.

This is just part of what Musk is telling investors is going to be a vast hypothetical cycle. For example, in the case of Grok, X is a customer and also provides a large distribution to Grok. Ultimately (going to pitch), Grok will be fed data from Musk’s other companies that will help it master the physical world in potentially limitless ways, starting with truly self-driving cars.

Another potential beneficiary is Tesla’s humanoid robot, Optimus.Currently, the Tesla robot is still in the laboratory, but Mr. Musk told the analyst In a call earlier this week, Optimus said it expects to be able to operate at Tesla’s factories by the end of this year. Even if that timeline turns out to be ambitious, if Musk’s sweeping vision is implemented, these clever assistants could do more, faster than previously imagined. Maybe you can.

In the meantime, the most immediate beneficiary of xAI’s meteoric growth momentum may be X itself. In the year and a half since Mr. Musk bought the platform, it has become a toxic cesspool and has since lost much of its value, but Mr. Musk has already announced that Company X owns a stake in xAI. The company was mindful of the current situation, and will therefore benefit from any positive developments in AI trends. I understand.

What that means for OpenAI, which last year became the fastest-growing startup in history, is an open question. Musk has been keeping his OpenAI in the spotlight ever since its popularity began to rise after the release of the ChatGPT chatbot.

Musk co-founded OpenAI in 2015 and resigned from the board in 2018, citing disagreements over the direction of the organization, which started as a nonprofit and later evolved into a for-profit organization. Since then, Musk has publicly lambasted OpenAI co-founder Sam Altman, mocked the brand and suggested it call itself that instead. Close AI.

Last month, when Musk open sourced the architecture of xAI’s early chatbot, Grok-1, meaning anyone could download and modify it, the move marked the end of Musk’s efforts to OpenAI. It was another part of an ongoing campaign to differentiate. A secret sauce with the world, Musk is currently suing.