Venture Capital Firms Are Actually Considering Giving Elon Musk $6 Billion For xAI

Why do they think this is a good idea?

Check, Please

At least one big Silicon Valley venture capital firm is considering a $6 billion cash infusion for Elon Musk's xAI startup and its troubled chatbot, Grok.

As people close to the fundraising told The Information, Musk is closing in on a first-round fundraising deal with potential investors including Sequoia Capital, which invested $800 million into Twitter when he bought it back in 2022.

The insiders did not specify how much Sequoia plans to commit or which other firms might be involved in the fundraising, but the Financial Times and Bloomberg have also confirmed that Sequoia is committed, with the FT reporting that Musk invited the companies to get in on the ground floor before others start investing.

The deal, as Bloomberg notes, would bring xAI's valuation up to $18 billion, which is not much less than that of Anthropic, another OpenAI rival created by exiles from the company that's valued at around $18.4 billion following its third round of fundraising earlier this year.

Copy Cat

As Musk seeks to build out his OpenAI competitor, he has also made comments mimicking his other rival's attempts to enter the AI space.

Earlier in April, he remarked during an X Spaces talk that training out Grok would require 100,000 of Nvidia's  H100 data processing GPUs, which at $40,000 per chip are considered the gold standard in AI compute power. While that number is less than a third of the 350,000 chips Meta founder and CEO Mark Zuckerberg said in January that he needs for his company's own AI projects, it's still indicative of his intentions.

As VCs seemingly salivate at the chance of big returns on their Musk investments, it's hard to see this news as anything but Silicon Valley types trying to ride the AI wave on a surfboard with massive holes in it.

If they were savvier, Sequoia and whoever else is planning to spend big on xAI would look at what the startup has actually put out so far, which has often been very shoddy and hilariously bad at following its founder's "anti-woke" mission.

They'd also be well-served to look at what's going on at Musk's other companies too, where execs are fleeing and longtime investors are starting to freak out as the multi-hyphenate's reputation and rhetoric precedes him.

Let's just leave you with this moment of zen: xAI's Grok cluelessly claiming that the "asylum where they raised me" meme is real.

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