xAI is in talks to raise $6 billion, according to the Financial Times, and Elon Musk is seeking funding from global investors, including Hong Kong investors, to launch under the Microsoft-backed OpenAI Challenge.
The billionaire's AI startup has attracted high-net-worth individuals and investors from around the world in recent weeks, the Financial Times reported.
These discussions also include family offices in the Beijing-controlled Hong Kong region.
Musk hopes to raise $6 billion in new capital for XAI at a $20 billion valuation.
According to the report, negotiations are still ongoing and Musk is still testing investors' enthusiasm to pay such a large amount of money.
Elon Musk is also targeting sovereign wealth funds in the Middle East while also reaching out to investors in Japan and South Korea.
As geopolitical tensions rise, raising capital for a US AI company in Hong Kong could become a politically risky venture.
Washington is trying to impose export controls to hinder the development of advanced technologies in China. Last year, the Biden administration blocked some US investments in Chinese artificial intelligence, including in Hong Kong.
Elon Musk's startup launched its first product in December, an AI chatbot called Grok that was trained on X social media posts, resulting in better results than competitors and faster responses.
The report indicates that Morgan Stanley is coordinating the financing process after Elon Musk financed the acquisition of Twitter in 2022.
The scale of the fundraising reflects the enormous cost of developing generative AI, which requires massive amounts of computing power, massive amounts of data and advanced chips.
According to a December filing with the U.S. Securities and Exchange Commission, xAI is seeking to raise $1 billion in capital from equity investors.
According to the filings, the company raised $135 million to reach its goal. A January Bloomberg report said the company had raised $500 million, and Musk called that report fake news.