Elon Musk’s artificial intelligence startup xAI announced plans on February 14 to meet with investors for a potential $10 billion fundraising round. This move signals strong investor confidence in xAI’s potential and Musk’s AI vision, positioning the company as a significant competitor to established players like OpenAI and Anthropic.
The capital raise would value the Grok chatbot developer at $75 billion, a substantial increase from its previous valuation of $51 billion. In 2024, xAI already secured two major funding rounds of $6 billion each in April and December.
Alongside this news, xAI is reportedly close to finalising a deal with Dell Technologies to purchase over $5 billion of servers powered by Nvidia GB200 chips. Analysts are expected to probe Dell about this deal during their February 27 earnings report. The announcement has already boosted Dell’s stock price by 4%, reflecting positive market sentiment toward AI developments.
Who takes the stake?
Current xAI investors — Sequoia Capital, Andreessen Horowitz, and Valor Equity Partners — are reportedly in talks to join the $10 billion raise, bringing xAI’s total funding to $22.4 billion. Interestingly enough, the potential involvement of international investors, including the Qatar Investment Authority, could add a geopolitical dimension to the funding round, highlighting global interest in AI development.
This substantial funding could accelerate xAI’s research and development efforts, potentially leading to AI breakthroughs. The company’s focus on “maximally truth-seeking” AI, demonstrated by its Grok chatbot, may see further enhancements. The potential synergies between xAI and Musk’s other ventures — Tesla, SpaceX, and X (formerly Twitter )— could create a unique AI ecosystem that affects multiple industries.
Musk’s ambitious goals for xAI, including understanding “the true nature of the universe,” indicate the company’s pursuit of long-term, high-impact research beyond commercial applications. xAI is likely to intensify its recruitment of top AI talent, which could lead to a “brain drain” from other tech companies and academic institutions, accelerating its development capabilities.
OpenAI takeover: worth another try?
The AI market is increasingly competitive, with xAI emerging as a formidable challenger to established players like OpenAI. Musk’s rejection of the $97.4 billion offer to acquire OpenAI underscores the industry’s high-stakes nature.
While an IPO isn’t explicitly planned, the massive funding round and rapid valuation growth position xAI for significant developments — whether through continued private investment, strategic partnerships, or an eventual public offering. The AI industry remains dynamic, and xAI’s moves will likely continue shaping the competitive landscape and driving innovation.
