Elon Musk’s AI startup seeks to raise $6 billion from investors to challenge OpenAI

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Elon Musk’s xAI is in talks to raise up to $6 billion, as the Tesla and X boss turns to global investors, including Hong Kong, to fund his challenge to Microsoft-backed OpenAI.

The billionaire’s artificial intelligence start-up has been courting wealthy individuals and investors around the world in recent weeks, according to multiple people familiar with the matter.

According to four people, these talks also involved family offices in Hong Kong, the territory increasingly controlled by Beijing.

Three people familiar with the talks said Musk hoped to raise up to $6 billion in new equity capital for xAI at a proposed valuation of $20 billion. However, people warned that negotiations were ongoing and that the Tesla boss was still testing investors’ appetite for such large sums.

One person said it had also targeted Middle Eastern sovereign wealth funds, while others said investors in Japan and South Korea had been contacted.

Musk did not respond to emails seeking comment. He has denied numerous recent reports about xAI’s fundraising, despite regulatory filings that show he is raising capital. After publication, Musk posted on X: “xAI is not raising capital and I have not had conversations with anyone about it.”

Raising money in Hong Kong for a US artificial intelligence company could become a politically difficult process as geopolitical tensions rise.

Washington has sought to impose export controls aimed at hindering China’s development of advanced technologies. The Biden administration last year banned some U.S. investments in Chinese artificial intelligence, including in Hong Kong.

Musk’s xAI launched its first product in December, a chatbot called Grok, which is trained using social media posts about X, allowing it to provide more up-to-date responses than its competitors.

Morgan Stanley – which helped finance Musk’s 2022 leveraged buyout of X, formerly Twitter – is coordinating the fundraising, one of the people said. The bank declined to comment.

The scale of the fundraising effort reflects the enormous costs needed to develop generative artificial intelligence – models that produce human-like text, images and code in seconds – which requires enormous computing power, large amounts of data and cutting-edge chip.

Rival OpenAI, based in San Francisco, has raised about $13 billion from Microsoft alone. Other startups such as Anthropic and Cohere have also raised billions of dollars from the likes of Google, Amazon and major Silicon Valley venture capital groups.

Nevada-based xAI filed documents with the U.S. Securities and Exchange Commission in December showing it was seeking to raise $1 billion in funding from equity investors.

The statement showed that it had raised $135 million towards its goal. A Bloomberg report from January said it had raised $500 million. Musk said on X that the news was “fake news.”

Musk was a founding investor in OpenAI, but left in 2018 due to disagreements with CEO Sam Altman. Lui launched his AI company in July last year, complaining that rivals such as OpenAI, Microsoft and Google censored their AI products and were not focused enough on security measures.

OpenAI is set to make a secondary sale of some shares of its employees in a deal that values ​​the San Francisco-based company at $86 billion.

Musk has revealed no details about how xAI would be financed, other than a post on X in November that said current X shareholders would “own 25%” of the company, without further explanation.

Backers of Saudi Alwaleed bin Talal.

Fidelity recently marked down its investment in X by about 70%, giving the company a value of about $12.5 billion.

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