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Sequoia commits to backing Elon Musk’s xAI start-up

April 26, 2024
in Finance
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Sequoia commits to backing Elon Musk’s xAI start-up
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Sequoia Capital, Silicon Valley’s best-known venture capital firm, has committed to investing in Elon Musk’s artificial intelligence start-up xAI, boosting the Tesla chief’s efforts to raise billions and take on OpenAI, Meta and Google.

Musk has spent months attempting to raise as much as $6bn from investors globally for xAI, which he launched in 2023 with a mission “to understand the true nature of the universe”.

The serial entrepreneur has approached investors who bankrolled his 2022 takeover of social media platform Twitter, which he renamed X, inviting them to invest in xAI ahead of others in a funding round that could value the company at $18bn or more, according to multiple people with knowledge of the matter.

Sequoia, which invested $800mn into Twitter, will also invest in xAI, according to the people. It is unclear what the size of its investment will be.

The Silicon Valley firm, an early investor in Google, YouTube and Apple, has backed multiple Musk projects in recent years, including his tunnel-digging business The Boring Company and commercial space flight venture SpaceX. Roelof Botha, Sequoia’s boss, was hired by Musk at PayPal in 2000.

Sequoia declined to comment.

Sequoia’s backing, which was first reported by The Information, will come as a boost to Musk as he attempts to catch up with rival AI start-ups such as ChatGPT-creator OpenAI and Anthropic, as well as Big Tech companies including Meta and Google, which have built the most powerful leading large language models that underpin new AI tools.

Building and operating LLMs is a cost-intensive exercise. Vast amounts of computing power and expensive hardware are required to train and run the models that support chatbots capable of generating lines of text, code and images in seconds.

OpenAI has raised $13bn from its largest backer Microsoft, while Anthropic has received commitments of $2bn and $4bn from Google and Amazon, respectively.

Musk has been steadily accruing the powerful chips required to train AI models and has been hiring engineers and researchers, some from Tesla, to support xAI. The capital investment would help to accelerate that project and bring xAI’s own chatbot, Grok, closer to the performance of its rivals.

Musk co-founded OpenAI in 2015 with the company’s chief executive Sam Altman and others. He left OpenAI’s board in 2018 following disagreements with Altman on the direction of research.

Last month, Musk sued OpenAI and Altman, alleging they had compromised the start-up’s original mission of building AI systems for the benefit of humanity. OpenAI has described the case as “frivolous”.

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