xAI seeks $15B raise that could value firm at $230B

Elon Musk’s artificial-intelligence startup xAI is in advanced discussions to raise $15 billion in new equity at a valuation of about $230 billion, according to a Tuesday report by The Wall Street Journal. 

WSJ, citing people familiar with the matter, said the proposed terms is an uptick from the $113 billion valuation xAI disclosed in March when it acquired Musk’s social-media platform, X. 

The details were shared with potential investors on Tuesday night by Musk’s wealth manager, Jared Birchall, who oversees many of his personal financial arrangements. 

CEO Elon Musk bashes CNBC Series E funding round report

The fundraising discussions came just about a week after Musk deemed “false” a CNBC report claiming xAI was pursuing the same amount in a “Series E” round, valuing the company at $200 billion. 

The Journal reported that the startup has moved the expansion of its data-center operations forward to support more advanced model training, looking to close the performance gap between its Grok models and competitors OpenAI’s ChatGPT and Anthropic’s Claude.

The race to train large models has locked companies into nearly nonstop fundraising cycles, with economists saying the industry will require “trillions of dollars” in infrastructure spending over the next several years. 

All large language model (LLM) developers are competing to secure chips, power capacity, and hardware needed to support future generations of their systems.

xAI funding rounds continue amid ties to X and Tesla

In June, xAI raised $5 billion in equity and another $5 billion in debt to finance the construction of its Colossus data center in Memphis, Tennessee. According to Reuters, the facility could supply the deep computing and energy needs for the AI firm’s long-term model development. 

Moreover, The Wall Street Journal previously reported SpaceX’s $2 billion investment in that round, and CEO Elon Musk has also publicly hinted at the idea of Tesla investing in xAI. He argued that Tesla’s strengths in AI, robotics, and autonomous systems make the idea strategically sensible. 

Shareholders, including Tesla chair Robyn Denholm, were presented with a resolution on the proposal during a recent meeting. It was received with mixed reactions, and Denholm said the final decision remains with Tesla’s board, which must determine whether the investment is in tandem with the company’s priorities.

AI firms seek funds to compete effectively

xAI’s fundraising efforts follow a series of funding rounds counted by its rivals, all seeking to clinch the top spot in AI technology. In September, Anthropic closed a $13 billion funding round that nearly tripled its valuation from March, while OpenAI itself raised $6.6 billion through a share sale in October, valuing the company at around $500 billion. 

Last month, Cryptopolitan reported that OpenAI was preparing for a potential IPO that could push its valuation to as high as $1 trillion. The company has pledged more than $1.4 trillion toward long-term AI infrastructure, even though it remains unprofitable.

OpenAI’s Chief Financial Officer Sarah Friar said at a tech conference last week that the US government might need to “backstop the guarantee that allows the financing to happen.” Both Friar and CEO Sam Altman later clarified that OpenAI had not requested government guarantees, but the remarks showed how most tech companies depend on OpenAI’s business.

Michael O’Rourke, chief market strategist at Jonestrading, believes Nvidia, Oracle, AMD, and Broadcom’s growth forecasts rely heavily on AI demand. 

“Friar was unequivocally clear they wanted funding backstops from the government,” O’Rourke said, adding that OpenAI’s later clarification “does not allay any fears.”

Meanwhile, Apple and OpenAI must now respond to a lawsuit filed by Musk’s X Corp. and xAI, after a federal judge ruled the case may proceed. US District Judge Mark Pittman rejected a joint bid by the companies to dismiss the lawsuit filed in August. 

Pittman’s written order did not explain his reasoning, but he instructed both sides to submit more filings to convince the court of their positions as proceedings continue.

The lawsuit claims Apple’s integration of OpenAI into the iPhone’s operating system harms competition by limiting the choices consumers have and using their monotony as an “unfair advantage.” 

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