We’re excited to invest in xAI. This secondary values the company at approximately $50B. This reflects a substantial increase from the $24B valuation in the Series B round of May 2024. xAI is a tier 1 AI company which benefits from strong affiliations with Elon Musk's portfolio companies, offering strategic advantages in the competitive AI landscape.

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Deal Terms

• Type: Secondary transaction - Preferred Series B shares
• Valuation: Same price as Series C ($50B valuation) ~$23/share
• Structure: 2nd & 3rd layer options (we're able to transfer $100k+ LPs into the 2nd layer via our SPV). The 2nd layer is a US based fund (we share the same fund admin). The cap table layer is a reputable US based fund
• Fees: 10% access fee, 0.75% mgmt fee (over 10yrs, paid upfront), 20% carry (note the cap table fund is charging the 10% access, 15% carry)
• Closing: 24th December

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Videos

• Elon’s perspective on why xAI will win
• xAI’s new Colossus supercomputer 

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Market Opportunity

The AI industry is projected to grow exponentially, with the overall market expected to reach $1.6T by 2030 and generative AI alone valued at $1T by 2032. xAI's strategic positioning is driven by:

• Access to proprietary, real-time datasets from X (formerly Twitter) with 550M active users.
• Leveraging Tesla's extensive real-world data and AI research, bolstered by partnerships with SpaceX, Starlink, and Neuralink.
• Open-source initiatives fostering widespread adoption and innovation.

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Product Development

xAI has demonstrated rapid progress in product development:

• Grok Series: xAI launched Grok-2, which performs competitively with OpenAI's ChatGPT-4o and Anthropic's Claude 3.5. Plans are underway to release Grok-3 by the end of 2024, utilizing 10-20x the compute resources of Grok-2.

• Product Timeline:some text
  • November 2023: Launch of PromptIDE for advanced prompt engineering.
  • March 2024: Open-source release of Grok-1 under Apache License.
  • August 2024: Release of Grok-2 with state-of-the-art (SOTA) performance.
  • October 2024: Public API release and beta launch of Grok.
  • November 2024: Grok publicly opened to beta users ahead of a global release.

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Infrastructure: Colossus Supercomputer

xAI unveiled the Memphis Supercluster, also known as Colossus, which is the world's most powerful AI training infrastructure:

• Specifications:some text
  • 100,000 liquid-cooled Nvidia H100 GPUs on a single RDMA fabric.
  • Completed in 122 days, activated in September 2024.
  • Located in Memphis, Tennessee.
• Expansion Plans:some text
  • xAI aims to double the capacity to 200,000 GPUs within months, including 50,000 upgraded Nvidia H200 GPUs.

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Commercial Traction

• X Integration (formerly Twitter) which is reportedly generating mid-9-figure ARR (i.e. ~$500M ARR). Access to X's 550M monthly active users, with a tailored subscription model for X Premium+ users.
• Strategic Partnerships: Collaboration with Tesla for real-world data, SpaceX for satellite connectivity, and Nvidia for hardware acceleration.

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Technology and Innovation

• Grok-1.5V and Beyond: Grok-1.5V, the first-generation multimodal model, offers capabilities beyond its peers, such as OpenAI's GPT-4, in image understanding, document analysis, and spatial reasoning. xAI plans to leverage the enhanced compute capabilities of Colossus for training Grok-3, expected to be released by the end of 2024.
• Open-Source Approach: By building on an open-source framework, xAI allows greater visibility into its model architecture, fostering integration and innovation from a global developer community.

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Team and Leadership

• Exceptional Leadership: Led by Elon Musk, a visionary with a track record across Tesla, SpaceX, Neuralink, and more. Musk's influence has attracted top-tier AI talent, investors, and partners.
• World-Class Expertise: The founding team includes alumni from DeepMind, OpenAI, Google Research, Microsoft Research, and Tesla, with key contributors to fundamental AI advancements like the Adam optimizer, Batch Normalization, and Transformer-XL.
• Speed of Execution: xAI's rapid pace of development is evident in the launch of Grok-1 within two months of its inception, demonstrating unparalleled efficiency.

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Strategic Investors

The Series C round has garnered strong interest from prominent investors and their current investors include:

• Venture Capital Investors: Andreessen Horowitz (a16z), Fidelity, Sequoia Capital, Valor Equity Partners, Vy Capital
• Strategic Investors: Nvidia, Gigafund.
• Notable Co-Investors: Saudi Prince Alwaleed Bin Talal, underscoring global investor interest.

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Synergies with the Musk Portfolio ("Muskonomy")

xAI leverages synergies across Musk’s business ecosystem:

• X (formerly Twitter): Provides a vast, real-time dataset with 1 trillion posts, enriching xAI's model training with unparalleled human interaction data.
• Tesla: Integrates data from Tesla's fleet, contributing over 160B video frames daily for real-world AI applications like self-driving vehicles and humanoid robots.
• SpaceX and Starlink: Offers global satellite connectivity, enhancing data flow and AI model scalability.
• Neuralink: Explores innovative human-AI symbiosis, paving the way for transformative advancements.

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Competitive Advantages

xAI’s unique access to Musk's business ecosystem, differentiated datasets, and advanced AI hardware provides a significant competitive moat:

• Proprietary Data Access: Unmatched real-time knowledge from X's platform.
• Tailored User Experience: Deep personalization through X's social interest graph.
• Faster Time to Market: Demonstrated by the rapid launch of Grok-1 within two months of development.

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Commitment to Responsible AI

xAI prioritizes ethical AI development. They will focus on Interpretable AI and aims to develop models that provide understandable inferences, promoting trust and transparency in AI systems.

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Financial Overview

• Series B Funding: Raised $6B in May 2024, achieving a valuation of $24B.
• Valuation Growth: The rapid increase to a $50B valuation in the Series C round reflects strong investor confidence and market traction.

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Use of Funds

The funds raised will be allocated toward:

• Expanding AI infrastructure, including scaling the Colossus supercomputer.
• Advancing R&D efforts on the Grok series and interpretable AI models.
• Enhancing commercial operations and deepening strategic partnerships.
• Attracting and retaining top-tier AI talent in a competitive market.

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Conclusion

xAI has made remarkable strides in AI technology, infrastructure expansion, and strategic partnerships within a short timeframe. With Elon Musk’s visionary leadership, a world-class team, and a robust financial backing, xAI is well-positioned to be a dominant player in the AI industry. This Series C funding round, already oversubscribed by top-tier investors, presents a compelling opportunity for stakeholders to participate in xAI’s continued growth and market success.