Investors who supported Elon Musk's acquisition of Twitter are reportedly seeing significant returns due to the rising valuation of his AI company, xAI. These investors, who received a 25% stake in xAI, are poised for substantial gains.

What Happened: xAI, founded by Musk last year, is reportedly nearing the completion of a $5 billion fundraising round. This could potentially double its valuation to $50 billion within six months, offsetting some of the unrealized losses from the Twitter deal. Notable beneficiaries include Fidelity, Oracle co-founder Larry Ellison, Saudi Prince Alwaleed bin Talal, and Jack Dorsey.

The strategic intertwining of Musk's ventures, including Tesla Inc. (NASDAQ:TSLA) and SpaceX, underscores the benefits for those backing his enterprises. The latest funding round will bring xAI's total investment to approximately $11 billion, crucial for its AI model development and supercomputer infrastructure, the Financial Times reported on Wednesday.

Despite Twitter's declining value, xAI's growth has been advantageous for Musk's backers, who initially contributed $7.1 billion for the Twitter takeover. The Financial Times noted that only previous xAI investors could participate in the latest fundraising, maintaining their stake undiluted.

xAI is yet to respond to Benzinga's queries.

Why It Matters: The rise in xAI's valuation comes as the company seeks to raise up to $6 billion to acquire 100,000 Nvidia Corp. (NASDAQ:NVDA) chips for its Memphis data center. This move is part of xAI's strategy to bolster its AI capabilities and infrastructure.

Additionally, Cathie Wood's ARK Venture Fund has opened up investment opportunities in Musk's private ventures, including xAI, SpaceX, and the rebranded social media platform X. The ARK Venture Fund (NASDAQ:ARKVX) would give exposure to the companies, with xAI representing 1.5% of the portfolio.