XAI seeks up to $200B valuation in next fundraising

https://www.ft.com/content/25aab987-c2a1-4fca-8883-38a617269b68

by andsoitis • 1 year ago

54 68 1 year ago

ft.com

andsoitis3• 1 year ago

https://archive.is/BIyFA

DataDaemon• 1 year ago

Thanks, but I prefer Kimi

lemoncookiechip• 1 year ago

I find it odd that investors are still so motivated to drop money into AI, specifically LLMs, not because I don't see value in the technology, I do, but because it feels to me like it only takes a few months (if that) for your company which might currently dominate with the leading product, to be left behind by someone else who just came out with a better, cheaper, and faster product.

I guess this is true for most tech, but with LLMs it seems to be at a pace that just doesn't feel worth it to invest knowing someone else will just leap over your investment soon, and that in a year or two, when you want some return (maybe longer), that your tech might have completely stagnated and completely left behind by everyone else's. I dunno, just a weird thought.

not_your_vase• 1 year ago

I would be surprised if these would be long term investments - I think most are going for a quick buck.

With Elon companies investors hope that the market will behave just as irrationally as with Tesla.

With other companies they hope that they will be bought up by bigtech.

goalieca• 1 year ago

These companies are burning cash. There’s no play but a long one.

Retric2• 1 year ago

Yea, I don’t think investors really internalize that LLM companies have effectively zero moat.

Customers can easily jump ship. Everyone is using effectively the same compute, nearly identical training data, very similar algorithms, etc. Worse past investments in a model become outdated quickly.

bee_rider4• 1 year ago

Doesn’t xAI have a bunch of their own data-centers?

https://arstechnica.com/tech-policy/2025/07/xai-gets-an-air-...

I wonder how investors have priced in their regulatory situation.

Aurornis• 1 year ago

I think Hacker News readers underestimate how sticky the typical customer is.

The average subscriber to these services isn’t following a constant stream of LLM news and jumping from platform to platform every time the leaderboard changes slightly. The average customer signs up and then inertia and familiarity take over. They stay signed and comfortable.

tintor• 1 year ago

Memory for end users, large gpu data centers, power plants and contracts to power them, and large amount of synthetic training data are the moat.

OpenAI also announced their own web browser too.

827a3• 1 year ago

The other thing that would scare me: What percentage of Anthropic's revenue comes from Anysphere/Cursor? Think about that for a second: Given that we know Cursor is on a nine-figure ARR now, the intrinsic value in being the "default" model in Cursor, similar to Google being the default search on iOS, is now worth billions of dollars. Does Anysphere have significant exclusivity arrangements with any of these frontier model providers? They took funding from OpenAI. The ludicrous clip at which Anthropic's revenue could drop by whole percentages just because Anysphere pushes a change to prefer competitors models, has got to be the scariest business arrangement in the history of computing.

None of these companies will survive if they don't own multiple parts of the stack. As deep as possible, to the hardware if they can. That's why Anthropic is investing heavily in Claude Code, and why OpenAI is looking at hardware. You can't just build models and sell tokens, yet that seems to be Grok's entire strategy right now [1]

[1] https://x.com/elonmusk/status/1943178423947661609

v5v33• 1 year ago

No one is using Grok. They have no path to profitability. They have very low traction among consumers, and even lower traction among enterprises. Their CEO seems to think that copy-pasting code into a web browser is a good strategy for attracting programmers.

Leaving aside the controversies, Elon is one of the best players at capitalism there has ever been. As per his wealth. And to think you and I know more than someone with a deep network of Investors and fellow CEO's would be a bold claim.

klodolph• 1 year ago

My top suspicion is that xAI’s valuation is more about moving money around and less about belief in the actual underlying xAI projects.

blitzar2• 1 year ago

Its real money and real suckers handing it over. YC will almost certainly be part of it.

John23832• 1 year ago

I always think of any of these “invest in Elon” projects as a way to curry favor by helping him bail out bad investments with new ones.

seydor• 1 year ago

I guess the advantage is their giant datacenters. Which is also baffling because AI hosting will be like web hosting, a commodity

coderatlarge• 1 year ago

it makes me wonder how the mistral investors feel now… maybe they’re just happy to be in the mix instead of looking in from the outside…

mullingitover2• 1 year ago

Microsoft really put this notion under a spotlight with how they deal with LLMs in VSCode Copilot. The LLMs are just a drop-down menu that you can switch between at any moment, on a whim. They all plug into the same toolchains and are essentially generic commodities. They have slightly different prices for usage but that's about it, their outputs aren't wildly different. On topic for this post: it's very telling that Grok models aren't available in Copilot and nobody cares.

I think this arrangement is probably the future of LLM usage, and it does not bode well for everyone betting the farm that their model will be special.

benoau• 1 year ago

It's the same with DuckDuckGo's search and Cursor, the models are interchangeable and there's no "walled garden", none of them can assert any control or restrictions on others, it's a strict meritocracy.

IMTDb• 1 year ago

Search engine are as well. At least in the eu they literally are the first thing a browser asks you when you launch it for the first time. On a dropdown you have 2 clicks to do to change. For search engine you are prompted to using Google is one click; using something else costs the same click.

Google is still managing an outrageous domination.

Being percieved as the best is still a huge headstart. 99% of the population is not using “last weeks llm that topped AIME and ARC-AGI“. They are using “ChatGPT” with the default model selected.

People are going to switch when “their tech friend tells them to switch”. The same way they switched from internet explorer to chrome. Once you reach that position you can afford being “not the best but good enough” for a long time.

xAI needs to convince investors that: OpenAI is struggling so there is an opening to take the crown and be popular enough to get people to switch. They have twitter to help make that happen.

And they need to convince that no one else is going so much better than they are anytime soon; they just need to be good enough

marcusverus• 1 year ago

Say you're trying to value a 1% stake in a leading AI company. You use a standard "expected value" formula to calculate the current value of the investment opportunity. For each possible outcome, you take the dollar value of that outcome, multiply it times the likelihood of the outcome, then sum the values of all possible outcomes. With this type of calculation, possible outcomes which are very unlikely can still be extremely valuable if the dollar value of that outcome is high enough to compensate for the low probability of success.

Now imagine you believe that this AI company might eventually deliver AGI, or even a Kurzweilian superintelligence. It would be easy to justify a near-infinite dollar value on that best-case outcome. And, of course, a possible outcome with infinite value confers infinite value on the investment as a whole, as long as its value is non-zero.

riffraff• 1 year ago

Pascal's wager does not seem a solid investment strategy tho.

andsoitis3• 1 year ago

odd that investors are still so motivated to drop money into AI, specifically LLMs

xAI > LLM

bgwalter• 1 year ago

What is their product though? It will turn into surveillance or military applications, which would explain the interest of the Saudi sovereign wealth fund.

liendolucas• 1 year ago

I find it odd that investors are still so motivated to drop money into AI, specifically LLMs...

Me too, but what shocks me the most are the insane amounts of money that are being moved. Does the tech really cost or has that value? Why always the ridiculous amounts?

pphysch• 1 year ago

Why always the ridiculous amounts?

Too much money with no place to go?

willahmad• 1 year ago

B2C might not be sticky, but enterprises can't easily migrate and it takes a quite long cycle of decision making to replace one product with another, in this case LLM.

I think everyone is betting on making a good product and convince enterprises to buy from them, this is where you can get sticky customers

crystal_revenge2• 1 year ago

I used to not understand as well, but then a friend asked me a question: "When Claude recommends a book, why doesn't it just link directly to Amazon and get a referral fee?"

I believe what investor's are chasing in LLMs is the same thing that Zuckerberg was chasing in the metaverse: not a new "technology" a new medium. The key insight in the development of the web was that a few companies can effectively control the entire thing (at it's peak both FB and Google basically had their tendrils on every page out there).

Apple's mobile play showed that their seeing the value in the fact that mobile was a brand new medium early on. This lead them to having control over a market that Google had some play in, and Facebook really couldn't get a hold on.

LLMs represent a new opportunity. The answer to my friend's question is very likely: "Because they eventually want to sell you the book through them". Sure there's not much of a moat, there wasn't much of a social media moat back in the day either, but eventually there will be a few winners and those winners will divide what may very well be the next "mobile" or even "web".

I already spend more and more of my online time chatting with Claude about various thing, most of the books I've ordered in the last few months came from conversations with Claude. I can absolutely imagine a world where AI is how I accomplish most of my purchasing, precisely because right now AI is not rotten with SEO spam. That will of course change, but likely not in exactly the same way the web changed.

There's a very likely future where Claude/ChatGPT/DeepSeek become iPhone/Android/Huawei, what investors are hoping is that they can make it Claude/XAI/DeepSeek (or some variant), because owning a piece of that can effectively be even bigger than owning a large amount of stock in early Amazon.

ori_b• 1 year ago

I used to not understand as well, but then a friend asked me a question: "When Claude recommends a book, why doesn't it just link directly to Amazon and get a referral fee?"

How much do I pay to make it recommend my book, rather than your book?

827a3• 1 year ago

Yeah but that last paragraph is the crux of it: No one is using Grok. They have no path to profitability. They have very low traction among consumers, and even lower traction among enterprises. Their CEO seems to think that copy-pasting code into a web browser is a good strategy for attracting programmers. Its most common usage is on X where people say "@grok is this true", which is fine, except its unclear if anyone is actually paying for that. Over the past week, OpenRouter has been processing ~125M x-ai/grok-3 tokens per day; compare that to anthropic/claude-sonnet-4 @ ~45B/day and openai/gpt-4.1-mini @ ~5B/day.

Yeah its only one somewhat specialized source, but its a big one. The only time anyone talks about Grok or xAI is their now-annual accomplishment of taking the intelligence crown, for about a month, before OpenAI comes out and beats them, then Anthropic comes out and beats them, then Gemini comes out and beats them, then DeepSeek crashes the stock market because china scary, then we repeat again. These things are so damn fungible now that it startles me that any investors would touch any of these companies at their current valuations.

The future where Claude/ChatGPT/DeepSeek become the next iPhone/Android/Huawei is only going to happen if these companies make hardware and traditional software operating systems. OpenAI is trying. But, by the way, one of those companies on the right side is already doing that and has a world-leading AI strategy (Google), so I'm not convinced the status quo is as disruptable as some people think.

7e• 1 year ago

Not at all, there is no moat around LLMs, but social media has a huge moat because of network effects. Mobile phones have a huge moat as well.

LLMs are more like web browsers. Nobody makes any money there, they are commodities. Look at Netscape and Firefox. Edge and even Chrome.

kjksf• 1 year ago

Musk denied it: https://x.com/elonmusk/status/1943795272515301624

These rumors are false. xAI is not seeking funding right now. We have plenty of capital.

perihelions• 1 year ago

It's so hard to decide who to believe in this dispute. FT with multiple sources; or, a guy who's committed securities fraud in the past lying about this exact subject matter.

re-thc• 1 year ago

But he might be right? They are not seeking funding right now. So maybe tomorrow?

blitzar2• 1 year ago

Funding secured.

isoprophlex• 1 year ago

Yeah well plenty of capital until Tesler shares shed another 20%

ujkhsjkdhf234• 1 year ago

Liar lies news at 11.

siliconc0w• 1 year ago

Competing to build what is effectively a commodity product is great for consumers but I can't see it being an amazing business.

MaxPock• 1 year ago

Valuation of 200 billion dollars for an AI that looks up Elon's tweets and aligns answers to them is ridiculous.This bubble needs to burst.

jpalomaki• 1 year ago

When you spend a lot of time working with a model, you probably start developing a "relationship" with it. You know how to describe things, what to expect. The model has learned your preferences. I don't think I will be jumping from model to another just like that. Not at least to save a few bucks on monthly fees.

For more generic AI it won't be just about the models. It's also about access to data. Everybody is closing the gates to content. xAI is in interesting position because they have all the data in X. X is great source when you want to know what is happening in the world. And they have also a deal with Telegram (although I'm not sure to what data they can access).

And even if the models become commodity, I don't think they will be worthless. Plenty of companies make big money on selling commodities. If AI delivers, selling access to the models should be a business opportunity of the century. Even if margins would be low, the business will be huge and infinitely scalable.

pikseladam• 1 year ago

XAI is valued not for its intelligence, but for its practical potential—especially in robotics and autonomous vehicles. In robotics, XAI helps ensure machines behave predictably in complex environments. In cars, especially self-driving systems, explainability is key to trust, regulatory approval, and user adoption. Intelligence without interpretability is a liability in these fields.

If xAI can pull this off, it holds massive potential for passive income and a large user base—even if it's not the best LLM. Success in integrating with robotics and vehicles could secure long-term contracts, licensing deals, and infrastructure partnerships. The market rewards utility, not just raw intelligence.

XAI seeks up to $200B valuation in next fundraising

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