xAI is Elon Musk’s answer to OpenAI, owned by his former good friend Sam Altman. Altman’s reluctance to give Musk power caused the world’s richest man to pull out of OpenAI a few years ago. According to a Bloomberg report, xAI’s monthly operating costs reach over $1 billion a month and this year’s operating costs will exceed $13 billion.
This is only about 3% of Elon Musk’s current wealth. However, xAI’s revenue this year is expected to be only $500 million and increase to $2 billion by 2026. The gap between operating costs and revenue is too high because xAI is still making huge investments in building out its data centers.
Unlike Google, Meta, Athropic and OpenAI, xAI does not have a large number of customers. Its largest use is Grok on X and Telegram. The US government has contracts with OpenAI and Anthropic to use artificial intelligence (AI) for military, intelligence and daily operations purposes. Google has partnerships with several governments such as the UK and Malaysia. Meta is also working with Palantir for AI to be used in weapons.
The disadvantage of xAI at this point is that the capabilities of their AI models are still not better than those of their competitors. However, because of Elon Musk's involvement and the hope that xAI will be the backbone of robotics technology and Tesla vehicles, it is still able to attract investments such as the $4.3 billion reported today.