Copyright © BusinessAMBE 2023

xAI, Elon Musk's artificial intelligence (AI) startup, is seeking $6 billion in investment. Talks with several parties are ongoing. According to Musk himself, this is complete nonsense, but submitted documents prove otherwise.

Elon Musk wants to use xAI to compete directly with OpenAI. That he is seeking investors in China instead of the United States in doing so will not be to the liking of the U.S. government. It does, however, show how hard the competition is being fought.

In the news: xAI is seeking $6 billion, mostly from abroad.

  • The company has ongoing negotiations with investor families in Hong Kong, insiders told the Financial Times.
  • There are also said to be interested parties in the Middle East, Japan and South Korea. For now, all talks are still at an exploratory stage, multiple sources said.
  • One of those the FT spoke to states that the bank Morgan Stanley is coordinating the search for that $6 billion. Morgan Stanley already invested in Musk's 2022 acquisition of Twitter, now X. It did not want to comment on the matter.
  • Musk himself vehemently denies all this: "xAI is not raising capital and I have not had conversations with anyone in this regard," he wrote in a post on X.
  • Official documents prove otherwise. In December, xAI filed a report with the US Securities and Exchange Commission stating that it is seeking $1 billion from investors looking to buy shares. According to the document filed, the company had raised $135 million by then.
    • Bloomberg news agency wrote in January that this amount had since risen to $500 million. "Fake news," Musk called it.

Musk versus the Biden administration

Zoomed in: Musk wants to compete with OpenAI.

  • Musk was involved in founding OpenAI, the startup known for its chatbot ChatGPT. In 2018, the billionaire stepped down, dissatisfied with its policies.
  • Since then, he criticized OpenAI and its top executive Sam Altman on several occasions. There was less development and more profiteering, the criticism read. "OpenAI should be renamed 'super closed source for maximum profit AI,'" he said in November.
    • Hence Musk's plans with xAI. A first project, the chatbot Grok, can currently be used by paying users of X. It also gets its information from the platform. As a result, Grok should be more up-to-date than ChatGPT. Previously, it appeared that it was easy to steer the bot toward incorrect news.
  • OpenAI, meanwhile, received a number of financial boosts, including from Microsoft, which invested $13 billion. Other startups are also finding support from Google or Amazon.
  • So it is not illogical that Musk is seeking outside capital for his AI startup. That he denies this, presumably has more to do with a certain sense of honor.

The Bigger Picture: Seeking money in Hong Kong: that undermines Biden's trade restrictions.

  • It is remarkable that Musk wants to find investors in Hong Kong in particular. The Biden administration imposed restrictions on the opposite movement: investments by American companies to Chinese AI producers are under a magnifying glass.
    • For example, there are restrictions on exporting advanced chips to China, as well as to areas under Chinese influence such as Taiwan or Hong Kong.
  • The actions of xAI could create additional geopolitical tensions. Furthermore, Musk is already regularly under fire over the way he invokes free speech as an argument for loosely moderating X. Thus, his relationship with the U.S. government may come under further strain.

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