Elon Musk's xAI raises $6 billion to build even more powerful AI supercomputers — Nvidia, AMD contribute to funding round

Elon Musk's xAI has raised $6 billion in its latest funding round, pushing its total capital raised to $12 billion at a valuation of $50 billion, reports TechCrunch. The round, which involved 97 investors, followed a doubling of xAI's valuation within six months and solidified the company's position as a growing competitor in the AI sector.

Major investors in this funding round include Nvidia, AMD, Andreessen Horowitz, Blackrock, Fidelity, Kingdom Holdings, and Sequoia Capital, among others. Only previous investors who backed Musk's earlier ventures, such as the Twitter acquisition, could participate. The minimum investment per participant was $77,593, but the identities of most investors remain undisclosed. The company plans to raise additional funds next year to sustain its growth as it seeks to challenge larger rivals in the generative AI market.

xAI has already built the Colossus supercomputer, which is powered by 100,000 Nvidia H100 GPUs. In the coming months, it is expected to expand to 200,000 Nvidia GPUs, and eventually, Elon Musk hopes to build a supercomputer with one million GPUs.

For reference, $6 billion is roughly enough to procure a supercomputer with servers containing 100,000 Nvidia GPUs at $30,000 per processor. Typically, GPUs account for around half of the cost of a supercomputer cluster. With more powerful supercomputers, xAI will be able to train more sophisticated large language models to gain an edge over OpenAI's ChatGPT and Google's Gemini.

Musk has positioned xAI to compete directly with industry leaders like OpenAI. He has accused OpenAI and its partner Microsoft of engaging in anti-competitive practices that hinder funding for alternative companies. Also, Musk claims that xAI benefits from data drawn from X. At the same time, X's recent privacy policy change allows xAI to train its models using user-generated content on the X platform. Beyond X, xAI leverages data from other Musk enterprises like Tesla and SpaceX to enhance its AI models.

xAI has rapidly advanced its technology with its flagship AI model, Grok, which powers several tools on X, including a chatbot accessible to X Premium users and image generator Flux. Unlike politically correct OpenAI, Grok can answer provocative questions while maintaining some boundaries on sensitive topics.

Grok currently supports customer service for SpaceX's Starlink internet service, and xAI is exploring potential collaborations with Tesla for R&D purposes. However, some Tesla shareholders have expressed concerns, accusing Musk of reallocating resources from Tesla to xAI and viewing the two companies as competitors.

xAI generates approximately $100 million annually, significantly trailing competitors like Anthropic and OpenAI, which are targeting billions in revenue. They also received significantly more funding: Anthropic and OpenAI have secured billions in funding. The report claims that AI venture capital activity reached $31 billion in Q3 2024, and as xAI accelerates its development, it aims to carve out a larger share of this booming market.