Tesla and SpaceX CEO Elon Musk has refuted reports suggesting his artificial intelligence (AI) company, xAI, has secured $500 million in investment toward its $1 billion fundraising goal. This comes as xAI engages in ongoing discussions with investors regarding its valuation, which could range from $15 billion to $20 billion.
Musk and the investors are set to finalize the terms in the coming weeks, with the possibility of obtaining computing power as an alternative to or alongside xAI equity shares.
In a recent statement on the social media platform X (formerly Twitter), Musk addressed the reports unequivocally, “This is not accurate.” The report, originally published by Bloomberg, asserted that xAI was well on its way to securing half its $1 billion funding target. Still, Musk’s denial has cast doubt on the accuracy of these claims.
Valuation talks and equity stakes
Sources cited by Bloomberg indicate that xAI is currently engaged in discussions about its valuation, with a range between $15 billion and $20 billion being considered. These valuations are subject to potential adjustments in the near future as negotiations with investors progress.
The specifics of these discussions revolve around the terms and conditions of investment, including the possibility of investors obtaining computing power as an alternative or supplement to acquiring equity shares in xAI.
In November 2023, Elon Musk mentioned that equity investors in X (the parent company of xAI) would be entitled to a 25% stake in xAI. This implies that investors are encouraged to invest at least 25% of their initial investment in X into xAI. For example, according to Bloomberg’s analysis, if an investor had contributed $10 billion to X, they would be invited to invest $2.5 billion or more in xAI.
Elon Musk’s denial of the reported $500 million investment in XAI has generated speculation within the tech and finance sectors. While the exact reasons for the denial remain unclear, it has prompted questions about the accuracy of the initial Bloomberg report and the negotiations between xAI and its potential investors.
Musk’s involvement in high-profile companies, including Tesla and SpaceX, and his various AI and space exploration ventures have made him a prominent figure in the tech industry. Consequently, any statements or actions related to his companies are closely scrutinized by investors, analysts, and the media.
The valuation range
The valuation range of $15 billion to $20 billion being discussed for xAI reflects the high stakes and potential market impact of the company’s AI endeavors. With AI playing an increasingly significant role in various industries, including autonomous vehicles, healthcare, and finance, the valuation of an AI company like xAI carries substantial implications for its future growth and influence.
Institutional and individual investors are closely monitoring these discussions, as a higher valuation would potentially provide xAI with more financial resources to pursue its AI research and development projects. Additionally, it could attract more attention from potential partners and collaborators in the rapidly evolving AI landscape.
The role of computing power
One of the intriguing aspects of the ongoing negotiations between xAI and its investors is the possibility of obtaining computing power instead of, or in conjunction with, equity shares. This alternative approach suggests that xAI is exploring innovative ways to secure the necessary resources to advance its AI initiatives.
Computing power is a crucial resource for AI companies, as it enables them to conduct complex computations and training processes essential for developing AI models. By offering investors the option to invest in computing power, xAI may tap into its investors’ expertise and infrastructure, further accelerating its research and development efforts.