As the Chief Executive Officer of Tesla and X ventures into the realm of international investors, including those in Hong Kong, to secure funding for his challenge against Microsoft-supported OpenAI, Elon Musk’s xAI is currently in discussions to raise up to $6 billion.
Sources familiar with the matter reveal that the tech mogul’s AI startup has been actively engaging with affluent individuals and investors worldwide.
Several sources have indicated that discussions have touched upon family offices in Hong Kong, a region increasingly under Beijing’s influence.
Musk is purportedly aiming to secure fresh equity capital of up to \(6 billion for xAI, targeting a valuation of \)20 billion, as disclosed by informed insiders. However, it has been cautioned that negotiations are ongoing, with the Tesla CEO also assessing investor interest in this substantial funding endeavor.
Reports suggest that potential investors in Japan and South Korea have been approached, with mentions of outreach to Middle Eastern sovereign wealth funds as well.
In the current climate of escalating political tensions, fundraising in Hong Kong for a US-based artificial intelligence entity could potentially become a sensitive issue.
Amidst Washington’s efforts to curb China’s technological advancements through trade restrictions, the Biden administration recently prohibited certain US investments in Taiwanese AI ventures, including those operating in Hong Kong.
Musk’s xAI introduced a robot named Grok in December, trained on social media content from X, enabling it to deliver more timely responses compared to its competitors.
According to sources, Morgan Stanley, a key player in Musk’s previous leveraged buyout of X in 2022, is reportedly co-organizing the funding round. However, the financial institution declined to comment on these speculations. Musk did not respond to an email seeking clarification.
The scale of this funding initiative underscores the substantial expenses associated with developing advanced AI models capable of generating human-like text, images, and responses instantaneously. This undertaking necessitates significant computing power, vast datasets, and cutting-edge processors.
In contrast, OpenAI, a San Francisco-based competitor, has secured approximately $13 billion in funding primarily from Microsoft. Leading venture capital firms in Silicon Valley, along with tech giants like Google and Amazon, have also poured billions into AI startups such as Anthropic and Cohere.
Records filed with the US Securities and Exchange Commission in December reveal that the Nevada-based xAI sought \(1 billion in funding from institutional investors, having already secured \)135 million towards this goal. A Bloomberg report from January indicated a $500 million raise. Musk dismissed this report as “misinformation” on X.
While Musk was an early investor in OpenAI, his departure from the company in 2018 following disagreements with CEO Sam Altman led him to establish his AI venture. He criticized competitors like OpenAI, Microsoft, and Google for censoring AI products and neglecting security measures before commencing his own AI enterprise last year.
OpenAI is currently in the process of a secondary sale of shares held by its employees, valuing the company at $86 billion. Musk has not disclosed further details regarding xAI’s funding, except for a blog post on X in November indicating that existing owners would retain a 25% stake in the company.
Notable backers of xAI include Oracle CEO Larry Ellison, Sequoia Capital, Andreessen Horowitz, Fidelity Management, and Saudi prince Alwaleed bin Talal, who participated in Musk’s $44 billion acquisition of Twitter.
Fidelity recently reduced its investment in xAI by approximately 70%, resulting in a market valuation of around $12.5 billion for the company.
