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Today on the podcast, we're talking about the fact that Elon Musk's XAI has just closed a $6 billion new round of funding for XAI and what they're actually planning on doing with that money. This is very interesting. We got the news from the U.S. security Exchange commissions. According to a filing that they were able to raise 6 billion. Some people were speculating that it might be 4 or even 5 billion, and it seems like they've actually surpassed even that, which is interesting considering the fact that only people who invested in their last round were permitted to invest to this round. So who were they? What are they doing with the money? How much have they raised total? Where? What's the state of xai? Why is it worth, you know, all of this money? We're going to be breaking down all of that on the podcast today. Before we get into the podcast, I wanted to say if you've ever wanted to start your own podcast, whether that's to grow your personal brand or to grow your business. 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So make sure to check it out with the Black Friday and Cyber Monday discount code. All right, let's get into the podcast. So investors in this new round of XAI's funding have really, what's interesting, each investor, I guess the. The minimum that was ever given was $77,000. So someone was able to get in at that, which is interesting, according to the filing. Now, why would someone give 77,000? What's interesting here is only people that invested in the last round were permitted to invest in this round. And you can assume, like, theoretically, they could do the same thing again in the future. So maybe someone was like, hey, look like we're not, you know, we don't have a ton of cash, but we'll throw in like 77 grand just to like keep our spot for the next round anyways. That's kind of interesting. Overall, they had 97 people that participated in this. The, you know, the securities and Exchange Commission shows much of the numbers, but they don't say who's actually participating in this. But previously the Wall Street Journal had reported that Valor Equity Partners, Sequoia Capital and Drayson Horowitz were all expected to contribute into this along with the Qatar Investment Authority, which is Qatar's sovereign wealth fund. So you're having of course, some of these really big players coming in and you have to. When you have a six billion dollar round, it's interesting because like Anthropic went and grabbed four billion dollars just recently for, from Amazon aws and that's all from one company. But that's very, very not standard or typical. And so in this case they were able to raise $6 billion and they, they did it from around 100 people. So this new cash they just raised brings everything total they've raised to about $12 billion. This is, you know, adding to the $6 billion that they added just this spring. And CNBC reported that in November, Xai was looking for about a $50 billion valuation. So this is about double what it did six months ago. Definitely growing very fast. And you know, some people are like, you know, what's the justification for this? I think what's interesting in all of this is people that did invest into this round were given access to essentially have, well, people that invested into Elon Musk's Twitter round were given access to about 25% of XAI's shares they could invest and buy. So you know, him essentially trying to bail out some of the invest of Twitter, which obviously went down in valuation since his purchase. So how, you know, what, what's, what's the plan here with Xai? How are they planning on ramping this thing up? What's going on after the company released Grok this. So this is pretty much just their like Chat GPT competitor that's on X. It does a bunch of different things. It's a, obviously it's a chatbot for premium users. I believe they're going to start bringing it to free users in some regions and probably testing that out kind of how Chat GPT has their free tier as well. Grok has what Elon Musk has described as a quote, rebel, a streak. Right. So it's going to answer what he says are spicy questions that are rejected by most AI systems. You know, it could be vulgar if you tell it to be vulgar, whatever, right. This is the thing that people talk about it that was kind of like the, I guess the marketing stick for it. It's, it's less politically, it's not politically correct and it's, you know, it's free speech and that kind of stuff. It's also quote maximally truth seeking. So I mean I can see like the appeal to a lot of this. Some people have tested it and said it's actually not much better in biases according than like ChatGPT. So apparently, you know, all these AI models trained off a lot of data, typically trained in San Francisco, they all have left leaning biases politically, which is, makes sense because that's the people that are training them in the cities that they're being trained in. I think the goal is for it to be, you know, non biased, but we're seeing that currently. Over the last year GROK increasingly got integrated into X. And what's interesting though is the developers that got this whole thing running, they, they made like I believe an open source edition of it originally. And anyways there's a bunch of new things happening with it. So in any case they also got Flux, which is an open source image generator added to it and because of that it can generate images. And again true to the, you know, the, the chat bots I idea these images don't really have guardrails. So obviously illegal or like super bad stuff is blocked. But you could, you can make you know, a picture of Trump. I remember like playing with it and I like had a picture of Trump driving a bus through like a fire and like Kamala Harris perishing out of a crashing airplane like holding a bag of money. Like you, you could, you know, I was testing out like how if it really was gonna have guardrails on political stuff like OpenAI does. So I can also see like some appeal to that. And they're able to do that because Flex is an open source model. So whatever guardrails they put on it is pretty much all it has. So what's interesting is it's been used a lot. Aside from like kind of like I guess these silly examples of no guardrail images or saying something vulgar if you wanted. I think the real use case that it's used for is summarizing news and trending events because it's integrated in to X and it has essentially what everyone's saying and it has all of these kind of like cutting edge news stories on there. I think that's the real like use case that's actually useful with this, with Grok. In any case, a bunch of people have reported that GROK might even start to handle more functions over XI XAI in the future, like their search capabilities. Right. You see these AI models are really great at search capabilities and you know, helping people do their account bios and their analytics and similar reply settings, a bunch of different stuff I think you can imagine it could get, you know, embedded in there. Maybe you have it set up to auto reply or, or talk to people based off of messages. So there's a lot of interesting stuff I think that it can do. It's definitely trying to play catch up, right? We have OpenAI, we have anthropic and they're, they're trying to catch up to them. They did just launch an API in October which is awesome. It's very similar to OpenAI's. You just change like one line of code and if you had OpenAI inte interest software with their API, I was able to get Grok on my new software for AI box very quickly because of that. So that made it quite easy. Which essentially allows third party developers like myself to build apps. You know, all these platforms can, can integrate it. So I think that's definitely a smart move on their part. According to the Wall Street Journal, they're preparing to release a their very own app, just a standalone kind of app for consumers, similar to Chat GPT in December. So this month it should be coming out, which will be very interesting. Now at the same time there's been a lot of drama with it. Elon Musk obviously is in the process of suing open AI because he was an early investor and we all know the drama there, right? What's interesting that I found here is that apparently Elon Musk says that OpenAI has been, you has been quote actively trying to eliminate competitors like xai, for example, by quote extracting promises from investors not to fund them. So this is actually something that OpenAI did. They said you can invest in our latest rounds when they're raising money, but you like they're trying to get people to promise like you won't invest in any other AI companies like Anthropic or xai. So according to Elon Musk, his council says that is unfair and that they're also unfairly benefiting from Microsoft's infrastructure, which pretty Much is a de facto merger. Microsoft bought 50% of the company. So I mean, you could say that's pretty much a merger. OpenAI is pretty much Microsoft, but sort of different. You know, there's all that drama too. So even with all of this, allegedly xai's data gives or X's data, Twitter, formerly Twitter's data gives XAI a leg up compared to some of its rivals with I think kind of like the cutting edge news and what people are saying about it stuff. Last month X actually changed its privacy policy to allow third parties, including xai, to train models on the post. So that's very interesting. And that doesn't mean that I think the whole world can. I think that means that anyone that's approved, so obviously they're going to approve XAI to do that. And that's a massive data set that they can use that they could, you know, essentially exclude others from using. So that is definitely something very valuable. And that's sort of why you start seeing this connection between X and Xai where people that wanted to invest in X Xai, if they were a previous Twitter investor, got like 20 access to 25% of the company. So very, very interesting. Okay, what is happening with the whole ecosystem? How are they running this? What, what's going on with the hardware? How are they training these models? What's going on there? This is very interesting because we had, you know, Sam Altman recently saying he was concerned that XAI was going to get access to more compute than them, yada yada, what's going on. So essentially they've outlined their vision, I think, as far as where they're planning on growing, where XAI actually might be, you know, training on data from a bunch of, a bunch of different companies owned by Elon Musk, including Tesla and SpaceX and their models could then improve a lot of the companies or a lot of the technology that are actually embedded into Tesla, SpaceX and others. So it's almost like instead of having AI departments in these companies, they're just kind of outsourcing it to XAI and then just reselling it back to them, which, I mean, it's got its pros and cons. It's like an AI focused company. So you can imagine how that'd be easier to get, you know, really cracked AI developers in there if they didn't want to be like, you know, stuck in a big organization. But at the same time, some people are suing Tesla, shareholders are suing Musk because they say that essentially he's, you know, starting this new company that's just going to divert talent and resources from Tesla and then it's going to essentially become a competing venture or a, you know, something that's going to cost them money. So there's some lawsuits going on there with that. What I will say is that according to the Wall Street Journal, XAI is supposed to be in talks with Tesla to essentially provide research and development in exchange for some of the car makers revenue. So that is very interesting as well and I'm sure that that previous lawsuit I mentioned is, gets into that. Regardless of all of that, I think their developer and consumer facing products only make about $100 million a year right now, which sounds great, but if you're looking at comparisons, Anthropic is apparently on pace to make about a billion dol. Billion this year. OpenAI is targeting $4 billion by the end of the year. So you know, a tenth of Anthropic. It's, it's still relatively small how much money XAI is making and I think there's definitely a lot of room to grow. I'm, I'm actually surprised that they even have that much money because I'm not sure how they segment out. Like, you know, you essentially get it for free if you have X Pro or premium or whatever. And so I'm not sure how they segment it out to say like it made money versus just X made money. Um, so yeah, I'm not sure how that works. But once they make their new standalone app for consumers, it's gonna be a lot easier and I think they'll be able to grow a lot, assuming the quality is fairly decent. So something that I found absolutely fascinating is how they are training this model. This summer, XAI started training some of their newest GROK models over at, over in Memphis, Tennessee in a data center. Memphis is, you know, not typically known for data centers. I mean, I don't hear about them very often there, but apparently they were able to build this one in 122 days. They pulled up, put up a data center very quickly. It's currently powered partly by portable diesel generators. So you can imagine this thing just came online super fast. And that essentially fixes the bottleneck that a lot of these data centers are having, which they're not able to get enough power from the grid in the cities that they're in. So they're hoping to upgrade their server farm, which has about 100,000 Nvidia GPUs next year. Because right now they're really kind of limited by not Having more than that. In November, they did win approvals from the Regional Power Authority of Memphis for 150megawatts of additional power. So that's about what, you know, that's about the same amount of power that powers about 100,000 homes. So they're going to be able to get that and hopefully switch off their diesel generators. But in order to do that, they had to promise to improve the, you know, the city's drinking water and they had to I think give the Memphis power grid a bunch of Tesla manufactured batteries at a discount. So you can see how Tesla is kind of benefiting them. They're benefit like it's Elon Musk's companies or it seems like they're all kind of like working together. But some people are criticizing that because they, whatever they say, it's going to be a straight on the power grid. So, you know, there's, there's pros and cons that people are talking about. I think right now from an operational standpoint, XAI is growing really quickly. They had about a dozen employees in March of just last year and now they have over 100. In October they moved into. It was actually the same old corporate office that OpenAI had in San Francisco in the Mission neighborhood. So OpenAI moved into there and some people said that was or Xi moved into there. Some people saying that was more symbolic. They apparently had told some investors that they plan to raise more money next year. So the $6 billion we're see a potential 50 billion valuation probably is not the end of it. It's not going to be obviously the only company raising insane amounts of money. We all saw that Amazon was able to pull in $4 billion from or anthropic was able to pull in $4 billion from Amazon. So it has raised a total of $13 billion. And then OpenAI recently raised 6.6 billion in October. So it's raised 17 billion. But honestly, this is absolutely fascinating to me. OpenAI seemed like the far ahead leader. But you know, we have OpenAI having raised about 18 billion. Anthropic has now raised about almost 14 billion. And then here we have Xai coming in with 12 billion. Like they're really. X A has become the top, one of the top AI companies and they're just moving very, very fast. So this is going to be really interesting. Some of these mega deals have driven the AI venture capital activity to about $31 billion across 2000 deals in Q3 of 2024, according to PitchBook data. So this is fascinating. We're seeing some massive growth. I'll keep you up to date on everything else happening with Xai, and if you enjoyed the episode today, if you wouldn't mind leaving me a review, it would be super, super appreciated. And also, if you've ever wanted to start your own podcast, make sure to get the coupon code the discount in the description for this week only for Cyber Monday. Thanks so much for tuning in and I'll catch you next time.