OpenAI’s $157B Power Play: Investors Blocked from Supporting Elon Musk’s xAI Rival

OpenAI, now valued at $157 billion, is demanding exclusive support from investors, discouraging any contributions to rival firms like Elon Musk’s xAI, as the competition for AI dominance intensifies.

OpenAI Blocks Rival Investments in AI Battle

The latest financing round for OpenAI, led by Sam Altman, raised nearly doubling its worth to $157 billion. Amidst the fierce competition in the field, participants were allegedly requested not to contribute to competitors like Elon Musk's xAI.

Thrive Capital, run by venture capitalist Josh Kushner, was the lead investor in the huge round, contributing $1.2 billion between the firm's own investment and a second vehicle for smaller investors, according to Reuters' sources familiar with the deal.

Thrive Capital Leads Major Funding

"The new funding will allow us to double down on our leadership in frontier AI research, increase compute capacity, and continue building tools that help people solve hard problems," read a blog post by OpenAI on Wednesday.

The round was co-hosted by Microsoft, Nvidia, Khosla Ventures, SoftBank, Altimeter Capital, Fidelity, the MGX fund out of Abu Dhabi, and Microsoft, a long-time investor.

Exclusive Investment Terms Set by OpenAI

If OpenAI meets its revenue goal next year, Thrive will be the only investor with the sole right to put $1 billion more into the company at the same price.

An interesting turn of events occurred when OpenAI informed participants that they were expecting exclusive donations. This meant that they were advised not to invest in rival companies like xAI and Anthropic, according to people who spoke with the Financial Times (via New York Post).

Silicon Valley Disrupted by OpenAI’s Strategy

In Silicon Valley, where VCs often back numerous companies in the same industry for the sake of maximizing their returns, this request stands out.

"Because the round was so oversubscribed, OpenAI said to people: ‘We’ll give you allocation but we want you to be involved in a meaningful way in the business so you can’t commit to our competitors," the source informed the FT.

Musk’s Ongoing Battle with OpenAI

Musk left OpenAI in 2015, the year it was co-founded, due to a difference in opinion on the company's future. He is presently suing OpenAI, claiming that Altman and his associates "intentionally courted and deceived" him into providing over $44 million during the startup's initial years.