Elon Musk intends to double the value of AI startup xAI to $45 billion thanks to Middle Eastern investors

Elon Musk is in talks with major investors from the Middle East to raise capital for his AI startup xAI. The planned financing could boost the company’s valuation to $45 billion, nearly double what it was worth this summer. xAI seeks to strengthen its position in the face of fierce competition from such tech giants as OpenAI, Google and Meta✴, and to interest investment funds in Qatar and Saudi Arabia.

Image source: xAI

Negotiations are at an early stage, but Musk has already reached out to leading potential AI investors, including funds from Qatar and Saudi Arabia, as well as current xAI investors Sequoia Capital and Valor Equity Partners. According to sources, the company’s mooted valuation is about $45 billion, which is almost double its previous value this summer. The current expectation is that Valor will lead this funding round, with Sequoia joining as a co-investor. However, as people in the know note, the terms of the deal and the composition of the participants may change during the negotiations.

Investors from Saudi Arabia, in particular the Saudi Arabian Sovereign Fund (PIF), may also play a key role in the new round. Musk’s relationship with PIF became seriously strained in 2018 when he announced his intention to take Tesla private, citing supposedly guaranteed funding. At the time, Musk claimed that the fund was ready to support the deal, but he later accused fund manager Yasir al-Rumayyan of insufficient support. In court papers, Musk indicated that he was “framed” by PIF, as a result of which the deal did not take place. Despite tensions in the past, in recent months Musk has been actively trying to resume dialogue with the fund and attract it to cooperation within xAI.

Musk’s recent participation in the Future Investment Initiative conference in Saudi Arabia demonstrates his interest in restoring business contacts with Middle Eastern partners. A source familiar with the negotiations noted: “These investors are always open to discussing new promising projects, especially in the field of AI.” The head of PIF also confirmed that the fund is currently reducing the volume of international investments, but is paying particular attention to AI as one of the priority areas. Saudi Arabia’s ambition to become a global AI hub is supported by major global players and underscores its ambitious goals in the sector.

Among the potential participants in the financing is the Qatari fund Qatar Investment Authority, which previously supported Musk in purchasing Twitter. The involvement of Qatar can seriously strengthen xAI’s position in the international AI arena. Gulf regions including Qatar, Saudi Arabia and the United Arab Emirates (UAE) have long aimed to dominate the technology sector by banking on large financial resources.

Saudi Arabia’s AI ambitions are underlined by its collaboration with US company Groq, which recently announced plans to build the world’s largest AI data center in Saudi Arabia. The project will be implemented jointly with Aramco Digital, the technology arm of state oil company Aramco, and will highlight the growing importance of the region in the international technology community.

At the same time, Musk is strengthening his political influence, becoming an increasingly significant figure in the election campaign of Donald Trump. He made significant donations to support the campaign of the former 45th President of the United States and participated in several campaign events. On his X platform, Musk actively promotes pro-Trump content, and at a conference in Saudi Arabia he openly admitted that he “plays a significant role in this election.” This active political position could influence the perception of Musk as a businessman and strengthen his position among the conservative part of American society.

The popularity of AI startups has skyrocketed since OpenAI’s ChatGPT chatbot was released in late 2022. According to PitchBook, in the first half of this year, more than 40% of all venture capital investments in the United States were directed to projects in the field of AI. However, developing advanced large language models (LLMs) requires significant financial investment, as well as collaboration with large investors, chip manufacturers and cloud providers. OpenAI’s latest round, which valued the company at $150 billion, has prompted a number of startups to reconsider their financial strategies and actively seek new sources of funding.