Elon Musk's artificial intelligence startup, xAI, is poised to reach a valuation of $20 billion, surpassing initial expectations, as investor interest continues to surge.

What Happened: As reported by The New York Post, Musk's xAI, the technology behind the Grok chatbot, is projected to raise between $7 billion and $8 billion. This valuation surpasses Bloomberg's earlier report of $6 billion at an $18 billion valuation this week.

The founder of Tesla Inc., SpaceX, Neuralink and Boring, Musk has urged investors to transfer funds by the end of Friday, marking the conclusion of the first funding round. The investment demand has been substantial, leading some investors to request a second close to contribute additional funds.

A key factor propelling this demand is Musk's persuasive argument that he can harness Tesla's computing power to support xAI. Reportedly, the electric vehicles utilize only 10% of their computing power. While some funding has originated from the Middle East, Musk has abstained from accepting money from China, including Hong Kong.

Despite previous denials of capital raising for xAI, Musk disclosed plans for a fundraiser in a regulatory filing last year, indicating xAI's intention to raise at least $1 billion through an equity offering.

Why It Matters: The higher-than-expected valuation of xAI is a testament to Musk's reputation as a tech visionary and the potential of AI technology. The overwhelming investor interest underscores the market's confidence in Musk's ability to leverage Tesla's underutilized computing power for xAI's benefit. However, Musk's decision to reject funding from China, a major global player in AI, could have implications for xAI's future growth and global market reach.

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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