Elon Musk’s xAI in New Funding Talks

Elon Musk’s artificial intelligence start-up, xAI, is in talks to raise new financing that could value it at as much as $120 billion, up from $80 billion little more than a month ago, two people with knowledge of the discussions said.

The talks are in the early stages, and xAI’s valuation could rise or fall as the talks progress, said the people, who spoke on the condition of anonymity. Investors have discussed putting $20 billion into the company, though that figure could also change.

The talks follow a large fund-raising effort by OpenAI, the San Francisco start-up that makes ChatGPT, which said in March that it had closed a financing round that valued it at $300 billion. OpenAI launched the A.I. boom in late 2022 with the release of ChatGPT, setting off a funding surge for other A.I. companies, including xAI.

Now xAI is now intertwined with X, Mr. Musk’s social media company. In March, he said he had sold X to xAI. The all-stock deal valued xAI at $80 billion and X at $33 billion, Mr. Musk said. The previous valuation of xAI, from a December fund-raising round, was about $40 billion.

Grok, the chatbot made by xAI, is trained on data posted by X users and is available on X. Bankers for X told investors this year that some of the social media company’s revenue came from xAI.

Enthusiasm among investors for A.I. companies cooled at the end of last year, as several high-profile start-ups were essentially folded into tech giants like Google and Amazon. But xAI and OpenAI are among the few that continue to seek billions in funding to build the leading A.I. technologies.

Mr. Musk did not respond to a request for comment about xAI. Details of the talks were reported earlier by Bloomberg.

(The New York Times has sued OpenAI and its partner, Microsoft, for copyright infringement of news content related to A.I. systems.)

Mr. Musk helped found OpenAI in 2015, along with the entrepreneur Sam Altman and others. He parted ways with the organization about two years later, after a dispute over its direction. At the time, OpenAI was structured as a nonprofit organization.

After Mr. Musk left OpenAI, Mr. Altman transformed it into a for-profit operation so it could raise the enormous amounts of money needed to build A.I. technologies. These technologies learn skills by analyzing huge amounts of digital data, which can require hundreds of millions of dollars in computing power.

After ChatGPT’s release in 2022, Mr. Musk created xAI to build similar technology. Around the same time, Mr. Musk sued OpenAI, arguing that OpenAI and two of its founders, Mr. Altman and Greg Brockman, breached the company’s founding contract by putting commercial interests ahead of the public good. Mr. Musk dropped the suit months later, before reviving it in federal court in August.