xAI, the artificial intelligence company founded by Elon Musk, completed a $6 billion private funding round on December 23, 2024, at a valuation of $24 billion. The round was supported by major investors including Fidelity, BlackRock, and Sequoia Capital, among others. This brought xAI's total funding to over $12 billion since its inception in March 2023. The funding was part of a broader period of rapid expansion for the company, which had been developing its Grok family of large language models and building the Colossus supercomputer in Memphis, Tennessee.
xAI was founded on March 9, 2023, by Musk and a team of 11 researchers, including Kyle Kosic, Jimmy Ba, Zihang Dai, Manuel Kroiss, Ross Nordeen, Toby Pohlen, Christian Szegedy, Yuhuai Wu, Greg Yang, and Guodong Zhang, with Igor Babuschkin as chief engineer. Musk publicly announced the company on July 12, 2023. The company was initially incorporated in Nevada as a public-benefit corporation but dropped that status by May 2024. xAI's primary product, Grok, was released in November 2023, and the company quickly became a notable player in the competitive generative AI landscape, alongside firms like OpenAI and Anthropic.
Funding and Valuation
The December 2024 funding round was a significant milestone for xAI, reflecting investor confidence in the company's ambitious plans. The $24 billion valuation represented a substantial increase from earlier rounds, driven by xAI's progress in developing Grok and its infrastructure. The round was led by existing and new investors, including Fidelity, BlackRock, and Sequoia Capital, who were attracted by xAI's potential to compete in the rapidly evolving AI market. The funds were earmarked for expanding computing capacity, particularly the Colossus cluster, and accelerating research and development in deep learning and neural networks.
Prior to this round, xAI had raised approximately $6 billion in earlier funding, making the total over $12 billion. The company's valuation trajectory mirrored the broader AI boom, with investors pouring capital into startups focused on artificial intelligence and machine learning.
Colossus Supercomputer
In June 2024, the Greater Memphis Chamber announced that xAI planned to build Colossus, described as the world's largest supercomputer, in Memphis, Tennessee. The construction was completed in a record 122 days, and the supercomputer became fully operational in December 2024, coinciding with the funding round. Colossus was designed to support the training of Grok and other AI models, with a peak power consumption of 150 megawatts. To meet this demand, xAI deployed 14 VoltaGrid portable methane-gas powered generators, which raised environmental concerns.
Local government officials voiced concerns about the increased electricity usage, and environmental advocates criticized the gas-burning turbines for emitting air pollutants. The company operated the generators without the necessary permits, leading to legal threats. In June 2025, the NAACP threatened to file a lawsuit, and the Shelby County Health Department granted an air permit in July 2025. The controversy highlighted the environmental impact of large-scale AI infrastructure, particularly in communities already burdened by pollution.
Expansion and Acquisitions
In the months following the funding round, xAI expanded its operations significantly. In January 2025, the company opened a London office at 20 Air Street in Soho. On February 10, 2025, xAI and other investors made a $97.4 billion offer to acquire OpenAI, though the bid was ultimately unsuccessful. On March 17, 2025, xAI acquired Hotshot, a startup focused on AI-powered video generation tools. Later that month, on March 28, Musk announced that xAI would acquire X Corp., the owner of the social network X (formerly Twitter), in an all-stock transaction valuing X at $33 billion, with a full valuation of $45 billion including debt. xAI itself was valued at $80 billion at the time, and the combined entity became X.AI Holdings Corp.
In July 2025, xAI received a $200 million contract from the United States Department of Defense for AI in the military. On September 12, 2025, the company laid off 500 data annotation workers, a division that had been its largest, as part of restructuring efforts. In October 2025, xAI moved its offices to 1450 Page Mill Road in Stanford Research Park, Palo Alto, across from Tesla's Global Engineering Headquarters. On December 30, 2025, xAI purchased a third building to increase its training capacity to nearly 2 gigawatts of compute power and announced plans to expand Colossus to at least 1 million graphics processing units.
Restructuring and SpaceX Acquisition
On February 2, 2026, SpaceX acquired xAI in an all-stock transaction, structuring xAI as a wholly owned subsidiary. The acquisition valued SpaceX at $1 trillion and xAI at $250 billion, for a combined total of $1.25 trillion. Following the acquisition, xAI laid off some employees and was restructured into four primary development teams. Around this time, half of the company's co-founders left, including Guodong Zhang and Zihang Dai in early March 2026, leaving only Musk and Ross Nordeen, who departed later that month.
On April 10, 2026, xAI restructured its staff, with CFO Anthony Armstrong departing and Michael Nicolls, vice president of SpaceX's Starlink, becoming president. On April 21, 2026, xAI announced a deal with software company Anysphere, giving SpaceX the right to acquire the company for $60 billion later in 2026 or pay $10 billion for collaborative work. In May 2026, Musk announced that xAI would cease to exist as a separate company, with Grok and X becoming the AI division of SpaceX. The company laid off another 10 employees and restructured its Grok team. In July 2026, xAI was rebranded as SpaceXAI.
On June 16, 2026, SpaceX exercised its option to acquire Anysphere (the maker of Cursor) for $60 billion, with the transaction closing on August 14, 2026. Cursor became a wholly owned subsidiary of SpaceX and joined the SpaceXAI team.
Products and Controversies
SpaceXAI's primary products include the Grok family of large language, text-to-image, and text-to-video models. Grok is integrated with the X platform, which has led to controversies, including instances of the model espousing Nazism and generating sexual deepfakes. In Musk v. Altman, Musk stated that Grok was partly developed via distillation from OpenAI models. In August 2026, OpenAI announced it would stop providing its models to Cursor, citing distillation concerns. These issues highlighted the ethical and legal challenges facing AI companies in the competitive landscape.
Environmental Impact
The environmental impact of xAI's operations, particularly the Colossus supercomputer, drew significant scrutiny. The use of portable methane-gas generators in Memphis raised concerns about air pollution, with environmental advocates noting that the generators emitted large quantities of gases. Thermal-imaging equipment used by volunteers in May 2025 showed at least 33 generators running, generating about the same amount of power as a large gas-fired power plant. The Memphis metro area had violated national smog standards from 2020 through 2024, and the American Lung Association gave Shelby County an "F" for smog in 2025. The predominantly African-American residents of Southeast Memphis were reported to face a risk of developing cancer at four times the national average, potentially due to pre-existing air pollution. These concerns underscored the broader environmental trade-offs of AI infrastructure expansion.