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The Story: Elon Musk’s AI company, xAI, a rising competitor to OpenAI, Google, and Microsoft, is seeking $1 billion dollars in its first fundraise.

Last week, the company’s SEC filing listed $1 billion as its benchmark. The filing also reveals that the company has already raised about $135 million in funding from four undisclosed investors.

After launching in July of this year, xAI has stayed relatively quiet outside of announcing the launch of Grok, the company’s chat bot with a “bit of wit” and “a rebellious streak.”

Grok was trained on Twitter’s massive data set of posts and is being rolled out to Premium+ subscription members of X, who pay $16/month for the subscription.

In a November X post, Musk stated that investors in the social media platform will also own 25% of xAI.

Expert Take: Oliver Libby, co-founder and managing partner at H/L Ventures and Doug Clinton, co-founder and managing partner at Deepwater Asset Management, both believe Musk and the xAI team is targeting $1 billion because that’s about the minimum needed to compete against the top AI companies right now.

“OpenAI, Anthropic, Google of course; they’ve all got billions of dollars in access to capital. I think we’re kind of seeing this paradigm where if you don’t have a billion dollars, as funny as it is to say, you probably don’t have a real shot at building a meaningful product,” says Clinton, who adds that companies need the money for R&D and servers simply to be a “player in the game.”

Clinton doesn’t think xAI will live or die by Musk’s reputation, but by the value of Twitter’s unique data set:

Musk has been outspoken against the “woke mind virus,” which he says has tainted OpenAI’s ChatGPT. xAI’s Grok will “answer spicy questions that are rejected by most other AI systems.” The polarization of an “anti-woke” approach is concerning to Libby:

“I’m not so sure that we need these AIs [chatbots] to embrace a political point of view in the way that their algorithms are choosing and selecting information… it is concerning to me that it’s going to have a point of view at all.”

Libby continues, “And look, I think we can all acknowledge also that technology itself has no agency and it doesn’t have a conscience. It all comes from how it’s trained and who writes it.” Libby argues that this problem appears to exist across AI chatbots, and not just with Grok.

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