X.ai Raises $6B at a Valuation Exceeding Anthropic
Musk also plans to buy 100k NVIDIA GPUs
Synthedia recently published a story about Elon Musk’s X.ai intent to raise $3 billion at a valuation of $18 billion. Those rumors turned out to be considerably too conservative from a fundraising angle. X.ai announced over the weekend that it had raised $6 billion at an $18 billion pre-money valuation, which translates into $24 billion with the new cash infusion.
Our Series B funding round of $6 billion with participation from key investors including Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital, Fidelity Management & Research Company, Prince Alwaleed Bin Talal and Kingdom Holding, amongst others…
xAI will continue on this steep trajectory of progress over the coming months, with multiple exciting technology updates and products soon to be announced. The funds from the round will be used to take xAI’s first products to market, build advanced infrastructure, and accelerate the research and development of future technologies.
Grok 2.0 Imminent?
X Daily News reported in an early April post that “Grok 2 will be done training in May and will be better than GPT4.” This appears to refer to the Grok 2 AI foundation model as opposed to an update to the generative AI chat assistant of the same name.
On April 1st, X.ai introduced the Grok-1.5 multimodal AI foundation model. It reported a considerable improvement in public benchmark performance compared to the 1.0 version released in November 2023. For the limited number of benchmarks cited, Grok-1.5 was shown as slightly behind OpenAI’s GPT-4 and Anthropic’s Claude 3 Opus. This demonstrated substantial improvements over the 1.0 model.
While the 2.0 model may complete its training this week, we are likely to see an announcement in June. Additional alignment training for use in the Grok chat assistant could delay public disclosure. However, X.ai doesn’t offer independent access to its frontier models, so there is no reason to wait for an announcement. The company can promote its scientific advances and create more buzz around a potential alternative to Meta’s Llama 3 models.
100k NVIDIA GPUs
Musk also revealed in a recent investor presentation that the company intends to build “Gigafactory of Compute.” It is expected to run a cluster of 100,000 NVIDIA H100 GPUs and be online in the fall of 2025, according to The Information.
That could turn out to be a smaller number of NVIDIA’s new Blackwell chips with a comparable capacity. Regardless, it would far exceed the 20,000 H100 GPUs employed to train Grok-2.0 and the reported 25,000 A100 GPUs used for GPT-4 training. The expectation is that the higher GPU capacity will enable faster model training on larger datasets. This may be particularly important for Musk as he intends to use a lot of visual data captured by Tesla automobiles to train the foundation model’s vision system.
At the current $30,000 H100 price tag, the 100,000 GPU cluster would account for $3 billion in revenue for NVIDIA and a comparable cost to X.ai. Those costs will only rise as GPUs are only part of the cost that X.ai will incur in building out a custom X data center. The H100 pricing is expected to fall as the Blackwell GPU accelerators begin shipping, so X.ai may get these at a discount to current costs. However, the multi-billion dollar investment in GPUs and other required computing infrastructure is surely a key reason that Musk sought to increase the funding round size to $6 billion.
This may also be a less risky bet than those made by several of the cloud providers that are counting on rising demand for model training and inference. In addition to training X.ai models, Tesla and X will need increasing amounts of inference capacity at competitive pricing. The “GigaFactory of Compute” could be viewed as a vertical integration strategy for Musk’s existing businesses that brings inference capacity in-house with the added bonus of capacity for training new X.ai models.
What’s Next?
The more significant development around Grok-2.0 would be the open-source release of the Grok-1.5 multimodal foundation model. The 1.0 release is currently available for download and use under the permissive Apache 2.0 license. However, the 1.5 model release will be more competitive with existing open-source models.
In addition, Grok’s open-source release requires users to deploy and manage the model on their own. This is not a task that many developers want to take on, at least until they know they want to use it. X.ai will get a lot of momentum out of a cloud provider offering API access to a pre-deployed model. Given Larry Ellison’s close relationship with Musk and X.ai, Oracle Cloud may be the first to offer this service, though any infrastructure provider could do it.
Another logical candidate to host a Grok LLM endpoint is NVIDIA’s DGX Cloud, given the company’s strong partnership with Tesla, its open-source model garden, and Musk’s intent to order another 100,000 GPUs for the Gigacomputer. Finally, AWS is following the “all of the above” AI model approach. This could be an opportunity for AWS to differentiate among the cloud hyperscalers, as Azure and Google are unlikely to add X.ai models soon.
The announcement also indicated that new products are coming soon. A $6 billion war chest will help drive product development and give X.ai the means to buy a busload of AI computing infrastructure. Momentum around model development, along with unique data sources via Twitter and Telsa, combined with billions in fresh funding, suggest X.ai may become a significant player in the open-source AI foundation model market very soon. Llama and Mistral have a competitor on the rise, even though OpenAI is Musk’s real target.
