Inside Musk's quest to beat OpenAI at its own game

Musk is promising the facility in Memphis will help xAI deliver the world's most powerful AI by December

- Meghan Bobrowsky, Berber Jin & Tom Dotan

Elon Musk spent the past year building his artificial intelligence startup xAI at breakneck speed. Now he has to turn it into a real business.

Musk started xAI last summer in an effort to play catch-up with OpenAI, the ChatGPT developer he co-founded and left in 2018 after a power struggle. He poached talent from across the industry. He pushed contractors to build a massive new data center in a matter of months, a nearly unheard of timeframe for a project of that size. Now he is promising the facility in Memphis, Tenn. will help xAI deliver the world's most powerful AI "by every metric" by December.

Investors have bought into Musk's vision, or at least his record of success. The startup has raised at least $11 billion and increased its valuation to $50 billion in a new funding round this month, making it the second most valuable private AI developer behind OpenAI.

As a moneymaking venture, though, xAI barely registers. The startup told investors its revenue is on pace to surpass $100 million annually. OpenAI expects to bring in nearly $4 billion of revenue this year.

Most of xAI's revenue has come from Musk's own web of companies. xAI's main product-its Grok chatbot-is available only to subscribers of his social network X. The startup is powering customer support features for SpaceX's Starlink internet service, people with knowledge of the matter said. It is also expected to help create new AI features for X's search engine, one of the people said.

The startup has discussed a deal with Tesla whereby xAI would get some Tesla revenue in exchange for providing the carmaker with access to its technology and resources.

Now xAI is trying to stand on its own. Earlier this month it released a paid tool developers can use to build products using Grok, offering discounts as an incentive. As soon as next month, it plans to launch a stand-alone consumer app, like ChatGPT, according to people familiar with the matter.