Elon Musk, CEO of Tesla and X, is seeking global investors, including those in Hong Kong, to fund his challenge against OpenAI, which is supported by Microsoft. His company, xAI, is in talks to raise up to $6 billion.
Many people familiar with the situation have said that in the past few weeks, the billionaire’s AI startup has been courting rich people and investors all over the globe. Four sources have confirmed that family offices in Hong Kong, a province under growing Beijing authority, have been discussed during these negotiations.
Musk reportedly wanted to secure $6 billion in new equity funding for xAI at a valuation of $20 billion, according to three sources familiar with the discussions. People warned, though, that talks were far from over and that Tesla’s CEO was still trying to gauge investor interest in such massive sums.
According to some, he had also gone after Middle Eastern sovereign wealth funds; others claimed he had contacted investors in South Korea and Japan.
Emails for comment went unanswered by Musk. Despite regulatory documents showing that xAI is raising funds, he has rejected multiple reports regarding the matter recently. (Musk) “xAI is not raising capital and I have had no conversations with anyone in this regard,” he wrote on X after the announcement.
xAI is not raising capital and I have had no conversations with anyone in this regard https://t.co/KyjeqnW9eu
— Elon Musk (@elonmusk) January 26, 2024
As global tensions escalate, it may become politically difficult for an American AI company to raise capital in Hong Kong. In an effort to slow China’s progress in cutting-edge technology, the United States government has been pushing for export restrictions. A number of US investments in Chinese AI were barred last year by the Biden administration, including those based in Hong Kong.
In December, Musk’s xAI debuted its first product, a chatbot called Grok. It gives more current replies than its rivals since it is taught using X social media posts. The fundraising is being coordinated by Morgan Stanley, which in 2022 assisted with Musk’s leveraged takeover of X (previously Twitter), according to one of the sources. No one from the bank would comment.
Generic artificial intelligence (AI) models that can generate human-like language, graphics, and code in a matter of seconds necessitate state-of-the-art processing power, massive quantities of data, and state-of-the-art chips, all of which contributed to the massive magnitude of the attempted funding.
Competitor OpenAI, situated in San Francisco, has received almost $13 billion from Microsoft alone. Anthropic and Cohere aren’t the only startups that have racked up multibillion-dollar funding rounds from Silicon Valley heavy hitters like Google and Amazon.
The Nevada-based xAI was seeking $1 billion in capital from equity investors, according to filings filed by the US Securities and Exchange Commission in December. According to the filing, $135 million had been raised towards the target. In January, Bloomberg reported that it had raised $500 million. This story was “fake news,” Musk stated on X.
Musk withdrew his investment into OpenAI in 2018 due to differences with CEO Sam Altman, with whom he had disagreed. In July of last year, he started his own artificial intelligence business, claiming that competitors like OpenAI, Microsoft, and Google were censoring their AI products and weren’t putting enough emphasis on safety.
Currently, OpenAI is valuing the San Francisco-based company at $86 billion after a secondary sale of shares by a portion of its employees. Apart from a November post on X stating that current X owners will “own 25 per cent” of the startup, Musk has been mum on the specifics of how xAI would be funded.
Backers of X include Larry Ellison of Oracle, Sequoia Capital, Andreessen Horowitz, Fidelity Management, and Saudi prince Alwaleed bin Talal; they all contributed to Musk’s $44 billion acquisition of the company that was then known as Twitter. X is now worth approximately $12.5 billion after Fidelity reduced its interest in the company by 70%.
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