Musk's AI startup prepares $300 million deal to confirm $113 billion valuation
The company, which is trying to compete with OpenAI, also plans to borrow $5 billion and may be launching a new round of investment
Ilon Musk's artificial intelligence company xAI, which develops Grok, plans to sell $300 million worth of stock. As a result of the deal, xAI expects to reaffirm the $113 billion valuation of the holding company, which also includes social network X. According to data sources at the Financial Times, the deal could be followed by a larger traditional investment round.
Details
xAI is preparing a $300 million share sale, during which employees of the startup will be able to realize their securities, sources told the Financial Times. According to them, the deal should confirm that the estimated value of xAI has reached $113 billion. In this amount, the startup owned by Musk was valued in March after acquisition of social network X, also owned by the billionaire. According to Musk, the takeover valued X at $33 billion and xAI at $80 billion.
The $300m share sale could be followed by a larger investment round in which the company will offer new shares to outside investors, one of the FT's interlocutors claims. xAI declined to comment.
In parallel, xAI has decided to borrow $5 billion from the market, revealed Reuters. According to its source, the company has launched a debt round including loans and high-yield bonds. The funds are planned to be used for general corporate purposes.
Context
Musk announced in March that combining X and xAI would allow both entities to take advantage of sharing AI models, computing power, distribution channels and staff. For example, AI developers could train models on the social network's data and go straight to its audience, the FT explained. However, it did not reveal further details of the structure of the March deal.
The opacity of the transaction has allowed X, which has lost some advertisers due to its loose moderation policy, to benefit from xAI's capitalization growth, says the FT. The AI startup was valued at $45bn in a $5bn private round late last year.
Last year, Musk gave a 25 percent stake in xAI to investors who backed the purchase of the former Twitter, including big venture capital funds such as Sequoia Capital and Andreessen Horowitz. The merger was discussed in a tight circle of people close to Musk, some X and xAI investors said.
Musk launched xAI in 2023 to compete with Sam Altman's OpenAI and other AI tech giants. The company quickly introduced the Grok chatbot and built the Colossus supercomputer cluster, one of the largest AI data center projects in the United States. Last month, Microsoft announced it would give customers of its cloud service access to xAI AI models, and messenger Telegramagreed to distribute Grok to its billion-strong audience.
