November 29, 2024 – Investors who backed Elon Musk’s acquisition of Twitter are poised to reap significant benefits from the soaring valuation of his artificial intelligence venture, xAI, according to reports from the Financial Times.
Musk has offered a 25% stake in xAI, which he founded last year to rival competitors like OpenAI and Anthropic, to investors who supported his $44 billion Twitter buyout.
Sources familiar with the matter have revealed that xAI is set to close a new 5billionfundingroundasearlyasWednesday,doublingitsvaluationto50 billion in just six months.
This implies that some of Musk’s backers, who incurred billions of dollars in unrealized losses from the Twitter acquisition, could receive “full compensation” through xAI stocks, given the startup’s substantial valuation increase.
Beneficiaries, who are investors in both Musk’s ventures, include Fidelity Investments, Oracle co-founder Larry Ellison, Saudi Arabian Prince Alwaleed bin Talal, Twitter founder Jack Dorsey, and Silicon Valley venture capital firms Sequoia Capital and Andreessen Horowitz.
Following this week’s funding round, xAI will have raised a total of approximately $11 billion in investments, funds that will be utilized for building AI models and one of the world’s largest supercomputer clusters.
The rapid growth of xAI has been a boon for Twitter equity investors, from whom Musk secured 7.1billiontofundhisTwitteracquisition.TheremainingfundscamefrombankloansandMusk′sownwealth,includingthesaleofTeslashares.BankslikeMorganStanleyandBarclaysholdabout13 billion in Twitter debt.
Subsequently, X’s value plummeted as advertisers abandoned the platform due to content moderation issues.
In May, xAI raised 6billioninfunding,markingitsfirstsignificantcashinfusionfromexternalinvestorsandbringingitsvaluationto24 billion. Many of Musk’s X backers opted to invest more capital into the startup, such as Andreessen Horowitz, Sequoia Capital, Prince Alwaleed, and Fidelity Investments.
According to several sources close to the matter, only investors who supported xAI in previous funding rounds were allowed to participate in the latest $5 billion raise.
Musk announced on X in November 2023 that X investors would own a 25% stake in xAI, although he provided no further details.
Insiders have indicated that X investors received a quarter of xAI’s equity across two funding rounds, adding that their shares were not diluted by the issuance of new stock following the latest funding round.
