Elon Musk Is Highly Optimistic About His AI Company

At an all-hands meeting at xAI’s headquarters in San Francisco last week, Musk told employees that if the company can hold on for the next two to three years, xAI will surpass its competitors.

The xAI CEO said that rapidly scaling computing power and data capacity will be the key components in the race to achieve “superintelligence”—surpassing human intelligence and becoming the most powerful AI company.

Musk said xAI could achieve artificial general intelligence (AGI), on par with or exceeding human intelligence, within the next few years, possibly as early as 2026.

Back in November, Musk said xAI had a 10% chance of reaching AGI with Grok 5, a model the company plans to release early next year.

He also told employees that xAI would have an advantage over other AI companies because it can access roughly $20–30 billion in capital per year and benefit from close ties to his other companies. Tesla has already integrated Grok into its vehicles earlier this year.

Overall, employees said Musk appeared satisfied with the company’s progress. One insider described the meeting as “quite exciting.”

Musk also floated ideas about building data centers in space and plans to colonize Mars. He said Tesla’s humanoid robot Optimus could one day operate these off-Earth data centers.

Previously, Musk said Optimus could support SpaceX missions as early as next year. Google CEO Sundar Pichai and OpenAI CEO Sam Altman have also publicly mentioned the possibility of building data centers in space, though Pichai acknowledged it would be a “moonshot.”

Over the past year, xAI has rapidly expanded its data center infrastructure under a project called Colossus. Earlier this year, the company said it had around 200,000 GPUs, and Musk stated that the plan is to scale up to 1 million GPUs.

xAI is one of many companies racing to build AGI and justify valuations in the hundreds of billions of dollars. Despite Musk’s significant influence, xAI remains a relatively new player in a race led by major incumbents such as OpenAI and Google.

The AI race shows no signs of cooling. Earlier this month, reports said OpenAI put the company on an emergency footing to rush out its latest model. Google released a new Gemini model in November, while xAI has been pushing out new Grok versions at a rapid pace.

At the all-hands meeting, xAI executives demonstrated updates to existing products such as Grok Voice, the app for Tesla vehicle owners, and the company’s AI agents. Updates included improved prediction accuracy for Grok, better audio recognition for Grok Voice, and new video-editing capabilities.

Financial and Reputational Pressure

xAI has made progress in developing powerful AI, but it is still struggling to compete with rivals such as OpenAI and Anthropic, which have more paying customers. The company is spending heavily on graphics chips and data center infrastructure, raising concerns among former executives and investors about its financial health.

The company also suffered a reputational shock when the Grok chatbot spread violent and antisemitic content on social media, forcing xAI to issue a public apology.

Birchall—a long-time head of Musk’s family office—plays a central role in xAI’s operations as well as fundraising from investors such as Andreessen Horowitz and Fidelity. Vy Capital, led by Hering, has also invested in xAI.

Tensions reportedly escalated to the point that Antonio Gracias—CEO of Valor Equity Partners, an early Tesla investor and supporter of xAI—had to meet with company leadership to mediate. However, Spiro denied this account, calling it “a complete fabrication.”

Sources said Valor has become more deeply involved in supporting xAI since several executives departed. Previously, Gracias also helped manage crises at Tesla and during Musk’s acquisition of Twitter in 2022.

Massive Fundraising Efforts

Since founding xAI two years ago, Musk has built a massive data center in Memphis, U.S., and raised more than $15 billion, promising to create the world’s smartest AI. In March, he merged xAI with the social media platform X, where the Grok chatbot answers user questions. Musk said the combined company was valued at $113 billion.

To stay in the race, xAI must continue raising capital as spending on data centers continues to rise. Musk believes computing power is the decisive factor in winning the “AI war.” The company is currently building a second data center in Memphis, expected to house around 550,000 Nvidia Blackwell chips to run Grok.

Sources close to the matter say Musk’s personal wealth and major investors will ensure xAI has sufficient capital to meet long-term needs.

Previously, xAI limited its ability to take on additional debt after raising $5 billion in debt through Morgan Stanley. The company has also received $2 billion from SpaceX and is in talks for Tesla to invest at least $2 billion.

Spiro again dismissed concerns about financial strain: “The notion that xAI is having difficulty raising capital is completely false and defamatory—investment demand consistently far exceeds supply.”