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Elon Musk is in talks with some of the largest investors in the Middle East about a fundraising for his artificial intelligence start-up that could roughly double the one-year-old company’s valuation to $45bn.
According to six people with knowledge of the conversations, xAI is in early talks with new and existing investors, seeking fresh capital to compete with OpenAI, which recently raised more than $10bn in debt and equity, as well as Anthropic and Big Tech rivals including Google and Meta.
Musk has approached investors in Qatar and Saudi Arabia about backing his AI start-up, according to three of the people. He has also talked to current investors including Sequoia Capital and Valor Equity Partners.
A potential valuation of $45bn has been floated with investors, close to double the level reached in a funding round this summer, said two of the people. Valor is expected to lead the round and Sequoia to participate, according to two other people with knowledge of the discussions, who cautioned they were at a preliminary stage and that the target valuation and participation could change.
Sequoia declined to comment. Musk and Valor did not immediately respond to a request for comment.
Musk’s relationship with Saudi Arabia deteriorated during the serial entrepreneur’s abortive attempt to take Tesla private in 2018. He became embroiled in a spat with the Saudi sovereign wealth fund, the Public Investment Fund, and its governor, Yasir al-Rumayyan, after tweeting that he had financing in place to take Tesla private.
Days later, Musk said the PIF had agreed to fund the deal. The transaction never materialised, and Musk accused Rumayyan of throwing him “under the bus”, according to subsequent court filings.
But Musk, who has become a close ally of Republican presidential candidate Donald Trump, has been working to engage the Gulf kingdom in recent months and has raised the prospect of investment in xAI, according to a person with knowledge of the conversations.
In a sign that the relationship has largely been repaired, Musk addressed Saudi Arabia’s Future Investment Initiative conference this week.
“It has been raised,” said a person familiar with Musk’s talks with Saudi investors. “These guys are always willing to have a conversation about new investment opportunities and he’s building one of the few AI companies at scale, so there shouldn’t be any surprise they are talking about it, but I don’t think it’s very advanced. In the last few months, he’s been trying to engage and have dialogue again [after the Tesla spat].”
On Tuesday, Rumayyan told the same conference that it was reducing the $930bn sovereign wealth fund’s targeted allocation for international investments, though AI remained a priority for the kingdom. Rumayyan also said the PIF was in talks with potential investors and wanted to make Saudi Arabia a “global hub” for AI.
Musk has also approached Qatari investors, according to one of the people familiar with the talks. The state’s sovereign wealth fund, the Qatar Investment Authority, previously helped finance Musk’s takeover of Twitter.
Oil-rich Gulf states, including Qatar, Saudi Arabia and the United Arab Emirates, have all expressed ambitions to be leading players in AI, as they have significant financial firepower and abundant energy resources.
Last month, Groq, the US AI company, said it planned to establish the world’s largest inferencing data centre in Saudi Arabia after signing a deal with Aramco Digital, the tech arm of the kingdom’s state-owned oil company.
The Wall Street Journal first reported on xAI’s fundraising plans. The Information reported Musk was in discussions with Sequoia and Valor.
Musk is making overtures to the Middle East at the same time as he is becoming increasingly central to the US presidential election. He has donated tens of millions of dollars to Trump’s campaign and affiliated groups, appeared at Trump rallies and used his social media platform X to amplify pro-Trump messages.
“I’ve been playing a significant role in this election,” Musk told the Future Investment Initiative audience on Tuesday.
Funding for AI start-ups has exploded since OpenAI released its popular ChatGPT chatbot in late 2022. In the first half of this year, AI start-ups attracted more than 40 per cent of all US venture funding, according to PitchBook.
Start-ups building the most powerful large language models, which power AI, are burning through billions of dollars a year and are reliant on close relationships with wealthy investors, chipmakers and cloud providers to meet the financial and technical requirements for training their models. As a result, top start-ups are engaged in a near-permanent fundraising effort.
Companies in the industry are also riding a wave of renewed investor interest to reprice themselves following OpenAI’s blockbuster funding round this month that gave the company a $150bn valuation.
