Elon Musk's AI startup, xAI, is poised to receive a significant boost in its race against competitors like OpenAI and Anthropic in the highly competitive AI space. According to sources, investors close to Musk are currently in discussions to raise $3 billion in funding for xAI, potentially valuing the company at $18 billion. Prospective backers include Steve Jurvetson and venture-capital firm Gigafund. Jurvetson, a friend of Musk's, serves on SpaceX's board and previously sat on Tesla's board. Luke Nosek, co-founder of Gigafund, is also on SpaceX's board and part of the "PayPal mafia" alongside Musk. xAI has not yet responded to requests for comment from Fortune or the Wall Street Journal. Musk founded xAI last year as a competitor to OpenAI, the parent company of ChatGPT. Musk later sued OpenAI, claiming it had abandoned its original nonprofit mission. xAI launched its own chatbot, Grok, in November and released an updated version recently. News of the potential $3 billion funding round indicates xAI's need for capital, as OpenAI has received a $13 billion commitment from Microsoft, and Anthropic has raised $6 billion with support from Google and Amazon. In January, the Financial Times reported that Musk was seeking to raise up to $6 billion for xAI, although he later denied fundraising.

A regulatory filing in December showed that xAI was aiming to raise $1 billion and had secured nearly $135 million. Meanwhile, the competition for AI talent intensifies. It was recently revealed that Ethan Knight, an engineer from Tesla, joined xAI, prompting Musk to tweet about OpenAI's aggressive recruitment efforts and his plans to increase AI engineers' pay. "The talent war for AI is the craziest talent war I've ever seen!" Musk remarked. The demand for professionals with expertise in training large language models and troubleshooting new AI platforms is far greater than the available supply, leading tech companies to offer substantial compensation. OpenAI's median salary, including bonuses and equity, is $925, 000. Despite these high salaries, a report by McKinsey found that over half of gen AI creators and heavy users are considering leaving their positions within the next three to six months, compared to a lower overall attrition rate among workers. Meta, the parent company of Facebook, has seen the departure of at least three high-level AI employees recently, including computer scientist Erik Meijer. Meijer disclosed that he declined enticing offers from several top AI companies. In an effort to retain top AI talent, CEO Mark Zuckerberg has reportedly personally appealed to and wooed engineers and researchers.