Elon Musk‘s xAI Raises $6 Billion to Build Most Powerful Supercomputer

Elon Musk‘s xAI raises $6 billion to build "Gigafactory of Compute" to challenge OpenAI

Jun 10, 2024

Elon Musk's xAI completed the largest-ever Series B funding round in May, raising $6 billion. How is the AI market? What is Elon Musk's xAI's future? Is it worth investing in?

We analysed the AI market from the perspectives of funding trends, revenue forecasts, and the most promising AI startups to answer these questions.

The AI Market Is Growing Rapidly

In 2023, a massive amount of capital flowed into the AI industry, especially into generative AI represented by large language models. 💰AI startups raised $21.8 billion in 2023, a fivefold increase from the previous year, even exceeding the total funding of the past four years. This year's funding is expected to rise further.

Regarding AI market revenue, the global generative AI market is projected to reach $1.3 trillion in revenue by 2032, with a compound annual growth rate (CAGR) of 42% over 10 years. 🧩The global AI hardware market (Inference Devices, Training Infrastructure) is expected to grow from $38 billion in 2022 to $642 billion by 2032, with a 10-year CAGR of 33%. 🧩The software market, where xAI operates (e.g., AI assistants), is projected to grow from $1.5 billion in 2022 to $280 billion by 2032, with a 10-year CAGR of 69%.

Top 20 leading AI company

Top 20 AI companies have raised a total of $38.3 billion. Nearly one-third of that total comes from OpenAI, thanks to about $10 billion from Microsoft. Other rising AI research firms like Anthropic ($7.7 billion) and xAI ($6.1 billion) have also contributed significantly.

xAI, a startup founded by former developers from DeepMind, OpenAI, Google Research, Microsoft Research, and Tesla, aims to "understand the true nature of the universe." xAI hopes to develop tools to compete with AI giants like OpenAI and Anthropic. The key to competing with these companies lies in computational infrastructure.

The Exponential Growth in AI Computation and xAI's "Gigafactory of Compute" Plan

Generative AI requires substantial computational resources, large training datasets, and algorithms. The size of models and the number of parameters used for training directly impacts the quality of AI. The higher the accuracy required for an AI model, the higher the computation power needed to train it.

Computation used to train AI system has grown exponentially over the past 70 years. In 2022, the computational power used to train Minerva (an AI that can solve complex math problems) was nearly 6 million times that used to train AlexNet a decade ago..

To compete with OpenAI and other AI companies, xAI needs to significantly increase its AI training power.

Musk stated that xAI is preparing to build a supercomputer (Gigafactory of Compute) for the next version of its AI chatbot, Grok. This supercomputer platform will use Nvidia H100 GPUs, and its size will be at least four times that of the current largest GPU cluster. This supercomputer will significantly enhance the Grok model.

To achieve this, Musk announced a massive GPU procurement plan, stating that xAI will purchase 100,000 Nvidia H100 GPUs to train Grok 3.0. If this plan is implemented, the company could become the third-largest owner of Nvidia GPUs in the world, following Meta and Tesla.

With the AI market booming, xAI's massive funding may accelerate the development and iteration of its chatbot, Grok, allowing it to compete with major AI models like OpenAI's GPT. xAI's future development is highly anticipated.

Notably, our friend, New Horizon, is pleased to have successfully arranged for clients to participate in xAI’s primary round of equity investing (May 2024), acquiring xAI’s preferred shares, at no premium, which are senior in the capital stack.

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Created by Wendy