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Elon Musk attends the Viva Technology conference, in Paris, on June 16, 2023.GONZALO FUENTES/Reuters

Elon Musk’s artificial intelligence startup xAI is in talks to raise up to $6-billion at a proposed valuation of $20-billion, the Financial Times reported on Friday, as the billionaire entrepreneur looks to mount a challenge to OpenAI.

The startup has been in talks with family offices in Hong Kong and is targeting sovereign wealth funds in the Middle East for the funding, according to the report, which cited multiple people familiar with the matter.

The AI race has been heating up with several investors signing big checks for startups looking to capitalize on what has captured Silicon Valley’s attention over the past year.

A $6-billion fundraise would be much higher than the $1-billion goal xAI had set last month in a filing with the U.S. Securities and Exchange Commission.

At $20-billion, xAI’s valuation would be a fraction of OpenAI’s, but in line with some other peers such as Google-backed Anthropic.

Musk has approached investors in Japan and South Korea for the latest fundraise, the Financial Times reported. His office did not immediately respond to a Reuters request for comment.

Morgan Stanley is co-ordinating the fundraise, according to the report. The bank was one of several that helped finance Musk’s takeover of social media platform X, formerly known as Twitter.

Last week, Musk denied a report that xAI had secured $500-million in commitments from investors toward a $1-billion funding goal.

The CEO of Tesla has been vocal about his plans to build safer AI. Musk co-founded OpenAI in 2015, but stepped down from its board in 2018.

Last year, xAI launched “Grok,” a chatbot rivalling OpenAI’s ChatGPT.

Musk also warned about developing AI and robotics outside Tesla, earlier this month, unless he gets more voting control at the electric-vehicle maker. He said he would be uncomfortable building Tesla into an AI leader unless he had 25 per cent voting control.

Thanks to the popularity of ChatGPT, the AI industry has been a rare bright spot in a subdued startup funding environment.

Anthropic and Microsoft-backed Inflection AI have also raised funds in recent months.

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