NVIDIA and AMD, leading the artificial intelligence (AI) chip market, have simultaneously placed bets on the AI startup xAI. Founded by Elon Musk, xAI is focused on developing an AI chatbot service similar to OpenAI's ChatGPT. As global big tech corporations accelerate their own AI chip development, xAI, which built the world's largest AI supercomputer this year, has emerged as a major client that NVIDIA and AMD cannot afford to overlook.
xAI announced on the 23rd (local time) that NVIDIA and AMD participated as strategic investors in a $6 billion (approximately 8.75 trillion won) Series C funding round completed earlier this month. A total of 97 entities participated in this investment, including these corporations, leading Silicon Valley venture capital firm A16Z, BlackRock, the world's largest asset management company, as well as sovereign wealth funds from Saudi Arabia and Qatar. xAI noted, "The secured funds will be used to launch groundbreaking products for billions of users in the future." xAI's valuation has increased to $50 billion (approximately 73.21 trillion won), more than doubling from $24 billion (approximately 35.14 trillion won) during the Series B investment in May.
xAI is a company established by Musk in July of last year to counter OpenAI. Musk, who was also an early founding member of OpenAI, has a connection to Jensen Huang, the CEO of NVIDIA, who personally delivered the first AI supercomputer 'DGX-1' to him in 2016. This is the first time that NVIDIA and AMD have participated in funding xAI, which counts Microsoft, Alphabet, Meta, and Amazon among its major competitors. The specific investment amounts from these corporations were not disclosed, but xAI explained that "NVIDIA and AMD are actively supporting the expansion of xAI's infrastructure."
The recent investment by NVIDIA and AMD is viewed by industry analysts as a strategy to prepare for big tech's rush to develop their own AI chips. To date, global cloud service providers (CSPs) such as Microsoft, Alphabet, Amazon, and Meta have purchased millions of NVIDIA AI chips; however, to reduce expenses, these corporations have recently partnered with chip design firms like Broadcom and Marvell to develop their own AI chips. According to market research firm Omdia, Microsoft purchased 485,000 units of NVIDIA's flagship AI Hopper chip this year. Meta is estimated to have acquired 224,000, Amazon 196,000, and Google 169,000 units of Hopper chips. With a unit price of $30,000 (approximately 44 million won) and high operational expenses, the industry has taken to calling this the "NVIDIA tax."
In this context, xAI is a strong customer for NVIDIA and AMD. In its announcement, xAI stated that it has built the world's largest AI supercomputer, 'Colossus,' since securing Series B investments in May. xAI remarked, "Colossus successfully became fully operational in just 122 days compared to an industry timeline that typically takes several years," adding that it plans to double the size of Colossus, intending to use 200,000 NVIDIA Hopper AI chips for this expansion. xAI's AI reasoning model 'Grok2' is being offered for free based on the social media platform Twitter (now X), which Musk acquired earlier this year. This model possesses reasoning capabilities similar to ChatGPT, supporting web searches and image generation functions. Industry assessments suggest that as Musk accelerates AI development by leveraging external capital for building large-scale data centers, he is likely to pose a threat to the frontrunner OpenAI in the near future.