Hey everybody, welcome back to the Elon Musk Podcast.
This is a show where we discuss. The Critical.
Crossroads the shape SpaceX Tesla X.
The Boring Company. And Neurolink, I'm your host,
Will Walden. XAI just locked in $10 billion
in new funding. At a $200 billion valuation,
it's double where it stood four months ago.
The speed of that jump raises one pretty big question.
What exactly are investors paying for right now?
Elon Musk has now secured the second largest private valuation
and AI behind Open AI. This new route, which includes
participation from Valor Equity Partners, VI Capital, Anderson
Horowitz, Sequoia Capital, and Fidelity, puts XAI ahead of
Anthropic and Inflection by a huge margin.
The funding is expected to close in the coming weeks, though XAI
hasn't commented about this. The group of investors looks
nearly identical to the ones that backed Musk's earlier.
Ventures especially. SpaceX and Tesla.
That familiarity likely helped compress timelines and inflate
the valuation. Now investors are betting on two
things. Musk's influence and XA is
tight. Integration with XXAI runs Grok.
That's the chatbot on X. And Grok is already absorbing
real time content from X. Of course that creates a self
reinforced data loop. Grok learns from X, responds to
X users, and shapes the activity on the platform.
And no other AI startup has that level of user engagement built
into consumer facing products. That loop there now the $200
billion price tag reflects that built in user base more than any
specific product milestone. Unlike Open AI or Anthropic, XAI
hasn't released benchmark comparisons for Grok show it
beating competitors across widely accepted test sets.
Instead, it is focused on open sourcing earlier versions and
shipping frequent updates more recently, Croc 2.5.
Now, that model arrived in June and matched GPD 4 on multiple
tasks, though it still trails in more complex reasoning and code
generation than the others. Now, open source also plays a
central role in how Musk is positioning XAI.
The company has released the weights and architecture for
several versions of Grok, including the tokenizer and
training setup. How that move attracts
researchers and developers who want to build on top of XAI's
work. And it gives XAI access to
community driven improvements without hiring everyone
directly. And Musk has framed openness as
a necessity to avoid centralized control of AI.
It also sets XAI apart from open AI to stop releasing weights for
its best models after just GPT. 2X AI's financial strategy
mirrors what Musk is done with Tesla and SpaceX.
Raise a butt load of money, aggressively attach long term
growth stories and ignite short term profitability.
Now, this round is reportedly structured as a tender offer,
meaning investors are buying existing shares rather than
injecting injecting fresh capital.
Now that implies early Sai shareholders, including Musk
himself, are cashing out some of their stakes at the new
valuation while still holding on to long term upside.
The company now plans to build its own supercomputer to support
future versions of Crock. Earlier this year, Musk
announced that XAI would build a system with 100,000 NVIDIA each
100 GPU's. It's nearly five times larger
than what Meta is currently running, and it would rank among
the largest AI compute clusters in the world.
And Musk wants it operational by the end of this year.
And it's there, pretty much if that timeline holds up, though,
if they get this done and it's perfect.
Would give XAI unprecedented hardware independence,
especially when combined with X's data firehose.
Now, unlike Open, AIXAI is tightly bound to a single
ecosystem. Everything is built and is
routed through X. That gives it a data advantage,
but also increases its platform risk.
If X continues to bleed users or struggle with ad revenue, that
drag could bleed into XA is momentum.
And at the same time, if Croc continues improving and X
regains relevance as an AI native platform, this flywheel
spins faster. XAI becomes the first company
for social media, and frontier models evolve inside the same
product. This funding around makes clear
that the bet isn't just on AI performance, though, It's on
Musk's ability to turn a medium platform into a huge data
engine. The strategy still has major
gaps, so Grok doesn't yet outperform Claude or GPD 4 in
most head to head evaluations. It lacks enterprise tools,
developer API's, or productivity integrations that competitors
have used to lock in users for a long time.
But none of that seems to matter to the investors buying in now.
Musk has already merged XAI and X Corp into a single company as
well. That move lets him shift
resources, staff, and product updates between teams without
regulatory friction. It also blurs the line between
social media and also the model lab that's going on at XAI.
Now Grok gets a built in user base, X gets an AI layer, and
the two grow together. All together now, this run gives
XAI more capital than any AI startup has ever raised in a
single. Go also sets expectations that
Grok will close the gap when rivals quickly try to take them
out. Investors aren't waiting for it
to catch up, though. They're betting that the
combination of Musk X and open source Momentum will let it
bypass traditional AI race dynamics entirely.
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