Elon Musk’s xAI raises Monster $6B Series B for AI Supercomputer and Grok 3

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Michael is an AI News obsessed watcher of AI startup funding trends and writes AI Supremacy Newsletter. He is a full time Newsletter writer covering emerging tech, from the semiconductor industry to things like Quantum computing, and other exponential technologies. His Substack and LinkedIn Newsletters have a combined audience of over 300k readers. This is his first guest post on VC Corner.  

Hey Everyone,

On May 26th, 2024 xAI the AI startup started by Elon Musk announced its much anticipated Series B round.

With the series B of Elon Musk’s xAI funding finally complete, we no longer have a duopoly between just Cloud funded OpenAI and Anthropic. With the addition of xAI, we have a significant third player now in the future of large language models. The massive Series B includes investments from a16z, Sequoia, Valor and means that the internal valuation of xAI that competes directly with OpenAI is now a staggering $18 Billion. That’s very close to what Anthropic was valued at when Amazon struck a deal with them.

Image Credits: Jesse Grant/The Hollywood Reporter / Getty Images

xAI also plans to build an AI supercomputer first reported by The Information. These developments mean it’s no longer just about waiting for OpenAI’s GPT-5, but now a variety of players that include:

• OpenAI

• Anthropic

• Google

• Mistral

• Meta

• Cohere

• Reka AI

• Adept AI

• And a number of Chinese AI startups, among others.

As impressive as the Series B is for xAI, this still means quite a long ways to catch up to the bleeding edge foundation model builders:

Cohere, the top Canadian AI startup that makes foundational models is also seeking to raise between $500 million and $1 Billion. Other major investors of xAI Series B include:

• Valor Equity Partners

• Andreessen Horowitz (often abbreviated as “a16z”),

• Sequoia Capital,

• Vy Capital,

• Fidelity,

• Future Ventures,

• Prince Alwaleed Bin Talal and Kingdom Holding

Historic $6 Billion Series B is Unprecedented in AI

To raise $6 billion in a single round is fairly historic for an AI startup, but this is Elon Musk we are talking about. Musk has said in public that xAI will need up to 100,000 specialized semiconductors to train and run the next version of Grok, and will require a “gigafactory of compute” to house those chips. Tesla and xAI will be major buyers of Nvidia’s new architecture of chips called Blackwell.