Poised as one of the main challengers to the creator of ChatGPT, xAI recently secured $6 billion in a funding round, boosting its valuation to $24 billion. Although this is still significantly lower than OpenAI’s $86 billion valuation, xAI has made remarkable progress in less than a year since its announcement last July.

Matt Aldridge, principal solutions consultant at OpenText Cyber Security believes xAI entering the market is an exciting development, particularly given the strength of the firm’s large language model (LLM) Grok.

“It is important to consider that, as an industry, we should not be hoping for one single winner in the generative AI space – instead, we should be looking for an ever-maturing ecosystem of specialist solutions, each with their own strengths,” Aldridge told Capacity.

This, he says, will ensure choice and variety in the market, as well as continued innovation and a higher likelihood that specialist solutions will be developed to tackle a broader range of problems.

“In the case of xAI, in addition to the great team which has been built by Musk, unique strengths in their favour are the sheer volume and velocity of data which passes through the X platform, combined with the huge numbers of willing subscribed users who are already interacting with the platform and looking to gain greater efficiency, accuracy and time savings in their dealings with it through the use of the Grok LLM chatbot.”

Another huge strength being brought to the table by Musk is the vast array of lessons learned from the self-driving work undertaken by Tesla over the years, Aldridge adds.

The AI in that solution is at an extremely advanced level, and the experiences gained by that team of harvesting reams of training data at scale from the real world will pay dividends in their quest for the ultimate multimodal generative AI model, he believes.

“Additionally, the Tesla robot, Optimus, will be an ideal vessel in which to plant the model and have it interact in the real world, in real-time, in real situations – this will massively accelerate its learning and success potential.”

There are some immediate challenges, though such as obtaining and constructing enough powerful compute resources to train its future models.

“But again, Musk has a history of getting the right technical supplies and resources together in the right place at the right time in order to succeed in his mission, so I have high confidence that such barriers will be overcome in time.”

“We are all privileged to watch the ‘battle of the bots’ unfolding, but I for one hope that there is no clear winner anytime soon.”

xAI’s rapid rise comes amid Musk’s ongoing lawsuit against OpenAI, the company he co-founded along with CEO Sam Altman.

The billionaire believes that OpenAI’s initial mission of building AI for the benefit of humanity had been compromised through its partnership with Microsoft.

The lawsuit said that rather than benefitting humanity, OpenAI was working on “proprietary technology to maximise the profits for literally the largest company in the world”.

Transparent AI

Meeri Haataja, CEO and co-founder at Saidot thinks that with xAI raising $6bn, Elon Musk’s supposed advocacy for responsible AI will now be put to the test as he takes on OpenAI.

“When it comes to providers of high-impact models, a small number of firms hold much of the influence and power. Therefore, competition is both necessary and a welcome addition.”

However, Haataja believes that xAI will be scrutinised by how it prioritises responsible development and data collection principles, highlighted by the recent lawsuit against OpenAI and criticism of Apple intelligence for privacy invasion.

“Musk has a golden opportunity to differentiate xAI with responsible and transparent AI practices – both areas in which its main rival OpenAI hasn’t been very successful.

“On the other hand, given his track record with Twitter/X, Musk himself does not have a history of acknowledging trust and safety teams.”

Given the responsibility and scrutiny from regulators on frontier model providers, Haataja believes Musk must make piece with building a robust AI safety team.

OpenAI, with its established reputation and strategic partnerships, holds a strong market position so she thinks xAI must carve out its own identity by applying systematic governance processes and ensuring accountability throughout model lifecycles.

She adds that Musk could further differentiate by supporting the downstream ecosystem of users and deployers in the safe use of their products, countering the trend of limiting liabilities by big vendors.

“If Musk wishes to avoid questionable or illegal data acquisition practices, xAI should adopt data minimisation and privacy-by-design principles, as well as respect for copyrights, which haven’t been in the exact focus of its rivals to date,” she says.

“In this sense, Musk has an opportunity to build its foundations differently and take, for example, the AI Act requirements for high-impact general-purpose models as a guiding standard on responsibility.

“However, it’s easier said than done, as we know how critical access to high-volume training data is for anyone who attempts to build high-impact foundation models.”

Moreover, the AI industry’s talent shortage poses a critical hurdle according to Haataja.

“With top professionals often joining established leaders like OpenAI, Google, Anthropic, and Microsoft, xAI must offer compelling incentives and foster a culture that attracts and retains skilled talent. Addressing these challenges is crucial for xAI to build credibility and compete effectively in the AI landscape.”


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