Elon Musk (Craig T Fruchtman/Getty Images)

Musk’s xAI seeking a $50 billion valuation is a lesson in chutzpah

Musk is raising $6 billion for xAI at a nosebleed valuation, despite low revenue.

11/18/24 11:57AM

It’s a good time to fundraise for an AI startup: less than two months after OpenAI raised $6.6 billion at a $157 billion valuation, CNBC reported that Elon Musk’s AI startup, xAI, is raising $6 billion at a $50 billion valuation, with $5 billion to come from funds in the Middle East. The funding round is expected to close next week, CNBC said.

One interesting detail about this fundraise: xAI’s revenue is likely far below competitors OpenAI and Anthropic.

In October, The Information reported that OpenAI was on pace for $4 billion in 2024 revenue, driven mostly by ChatGPT. Previously The Information reported that Anthropic, the owner of generative-AI platform Claude, was on pace for $1 billion in annualized revenue, with the majority coming from API fees. At the time, Anthropic was looking to raise new funding at a $30 billion to $40 billion valuation.

Unlike these two competitors’ 10-digit revenue figures, xAI’s revenue is likely much, much lower. Until mid-October, when xAI added a tool to let developers create applications powered by its chatbot, Grok, the company’s only known revenue stream was X Premium subscriptions, which gave users access to Grok. On October 15, TechCrunch reported that X had made a total of $200 million from in-app purchases since X Premium was initially launched as Twitter Blue, meaning that any revenue cut earmarked for xAI is likely in the tens of millions, a far cry from the billion-dollar figures of its competitors.

But xAI does have a few things working in its favor.

The company claims it has the world’s largest data center in Memphis, Tennessee, which Nvidia CEO Jensen Huang called “easily the fastest supercomputer on the planet.” The company is also already integrated with social-media platform X, and there’s an opportunity for xAI to work with Musk’s other companies, like Tesla.

We can’t forget that Musk was one of OpenAI’s founders (he’s now suing the company), and his relationship with President-elect Trump could prove advantageous when it comes to new AI regulations.

Basically, a $50 billion valuation is as much a bet on Musk as it is on xAI.

Millie Giles

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Demis Hassabis, Google DeepMind’s CEO and founder, was also an early Anthropic investor

A chess prodigy and an actual a knight of the realm in the UK, it’s perhaps no surprise that Demis Hassabis has made some strategic moves about his exposure to AI upside. According to people familiar with the matter, the influential AI architect became an angel investor in Anthropic, currently behind many of the leading AI models, per Arena AI leaderboards.

The Nobel Prize winner’s position in the Claude creator was previously undisclosed and, per the Financial Times, highlights Hassabis’ “growing influence across the AI industry.”

Google, which bought DeepMind, the company that Hassabis cofounded and heads to this day, for a reported ~$400 million in 2014, is also a key Anthropic investor. The tech giant reportedly plans to invest up to $40 billion in the AI company as part of the mutually beneficial relationship the pair have forged, with reports that Anthropic has committed to spending $200 billion in the other direction on Google’s cloud services over the next five years.

I’m playing all sides, so I always come out on top

In addition to his financial support for Anthropic, Hassabis has also invested in a range of AI startups launched by colleagues, such as Inflection AI, a company set up by DeepMind cofounder Mustafa Suleyman (who is now CEO of Microsoft AI), as well as efforts from other collaborators, like David Silver’s Ineffable Intelligence.

Hassabis also emerged as a recurring figure on the fringes of the recent Elon Musk v. Sam Altman trial, cropping up repeatedly in testimonies and court documents and appearing to live, as The Verge put it, “rent-free” in Musk’s head.

Founded in 2021, Anthropic has recently raised funding at a reported $900 billion valuation, sending it soaring ahead of competitor OpenAI.

Google DeepMind’s Demis Hassabis emerges as early Anthropic investor

The Nobel Prize winner’s position in the Claude creator was previously undisclosed and, per the Financial Times, highlights Hassabis’ “growing influence across the AI industry.”

I’m playing all sides, so I always come out on top

Founded in 2021, Anthropic has recently raised funding at a reported $900 billion valuation, sending it soaring ahead of competitor OpenAI.

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The verdict caps off a three-week blockbuster tech trial that could have seen Altman and Brockman removed from OpenAI leadership.

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