Since its inception in July 2023, xAI has been developing Grok-1. Credit: Koshiro K/Shutterstock.

Artificial intelligence (AI) startup xAI is currently in discussions with investors for a funding round that could value the Elon Musk-backed company at approximately $40bn. 

These talks are still in the preliminary stages and subject to change, reports Bloomberg, citing sources.  

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If the deal goes through, it would indicate a significant increase from the company’s last valuation of $24bn, reached with funds raised in May 2024. 

The previous $6bn Series B funding round attracted backing from prominent investors such as Andreessen Horowitz, Sequoia Capital, and Kingdom Holding.  

xAI did not immediately respond to requests for comment on the news, initially reported by the Wall Street Journal. 

Since its inception in July 2023, xAI has been developing Grok-1, a competitor to ChatGPT. It was released in November 2023 for premium X subscribers.  

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During a recent virtual appearance at the Future Investment Initiative conference in Riyadh, Musk outlined his ambition to double xAI’s computing power, a critical resource for AI development.  

He also mentioned that xAI’s data centre in Memphis is currently the largest of its kind.  

xAI is aiming to rival OpenAI, which is currently leading the AI sector and was recently valued at $157bn. 

OpenAI has attracted investment from major players such as Microsoft, SoftBank, and NVIDIA, along with Thrive Capital, Khosla Ventures, and the newly established Abu Dhabi investment company MGX.  

In conjunction with its funding round earlier this month, OpenAI announced its transition to a fully for-profit governance structure to draw more investment. 

According to GlobalData, the overall AI market is projected to be worth $909bn by 2030, growing at a compound annual growth rate (CAGR) of 35% from 2022 to 2030.  

Specifically, in the GenAI segment, revenues are anticipated to surge from $1.8bn in 2022 to $33bn in 2027, representing a CAGR of 80%.