Tesla’s (TSLA) CEO Elon Musk’s AI venture, xAI, could be in discussions with investors for a fresh funding round, according to an exclusive Wall Street Journal report. This funding round potentially values the company at an impressive $40 billion.
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Just a few months ago, xAI was valued at $24 billion after raising $6 billion. Now, the company aims to secure more funding to push its value higher. Silicon Valley’s AI firms are raising funds at a rapid pace to finance the vast computing power necessary for training and running these AI models. This surge in valuation reflects the tech industry’s intensifying competition to advance generative AI technology.
AI Startups Are Raising Funds Rapidly
The rapid pace of fundraising is clear from recent funding rounds of prominent AI startups. Earlier this month, OpenAI raised $6.6 billion, reaching a staggering $157 billion valuation in one of the largest private U.S. funding rounds. Meanwhile, Perplexity, an AI search startup, is also seeking new investments that could double its valuation to $8 billion, according to another WSJ report.
Why Does xAI Require More Funds?
The need for funding at xAI was indicated by Musk at a Saudi conference, where he noted that developing frontier AI models demands immense computational resources, requiring more funds. This is because training advanced AI requires extensive data processing power and specialized hardware.
Additionally, Musk describes xAI’s mission as building the “most truth-seeking” AI, embodied in its Grok model, which powers a chatbot available exclusively through Musk’s social media platform, X. Grok serves as both a premium tool for users and a platform for developers to create AI-powered applications.
Furthermore, to accelerate AI training, xAI has constructed a massive data center in Memphis, Tennessee, housing 100,000 graphics processing units (GPUs), which the company aims to double to 200,000. Additionally, xAI has expanded its revenue streams. Until recently, its primary revenue source was tied to premium subscriptions on Musk’s social media platform, X, featuring Grok. Now, developers can also access a new tool for building applications with Grok.
Moreover, xAI uses data from X to train its AI models and has considered arrangements with Tesla, where xAI’s technology could support the carmaker in exchange for a portion of TSLA revenue.
Is TSLA Stock a Buy?
Analysts remain sidelined about TSLA stock, with a Hold consensus rating based on 11 Buys, 16 Holds, and eight Sells. Over the past year, TSLA has increased by more than 30%, and the average TSLA price target of $207.83 implies a downside potential of 19.9% from current levels.
