🤖 xAI nears $10B deal with Oracle

Today’s newsletter is 636 words - a 3-minute read (5-minute if you take your time…🐌)

Welcome back everyone!

Excited to have you join us: We’re Chris & Nolan (@chrisnolansf), and welcome to SF Whisper - a newsletter covering the most interesting business and local news of San Francisco.

As always: if you were forwarded this email or are new to the Whisperers community, click here to become a subscriber. Got a news tip or an idea for us? Just reply to this email :)

Anyways. Let’s get started -

xAI nears $10B deal with Oracle

Elon’s Cloud Computing Ambitions

Elon Musk's one-year-old artificial intelligence startup, xAI, is in talks with Oracle executives regarding a potential $10 billion deal to rent cloud servers, marking a significant move for the company. This negotiation comes as xAI aims to catch up with competitors in the AI development space, necessitating substantial investment in specialized servers for training and running conversational AI models. The proposed deal, similar in scale to agreements struck by other leading AI developers with Oracle's larger cloud competitors, highlights the financial and strategic importance of cloud infrastructure in AI development. Moreover, Musk's emphasis on funding allocation toward AI servers underscores the critical role of computing power in advancing xAI's technology.

Strategic Vision and Challenges Ahead

Musk's pitch to investors reveals his strategic vision for xAI, focusing on significant investments in renting AI chips to enhance the capabilities of xAI's flagship product, Grok. The substantial computing requirements for training advanced AI models underscore the immense financial needs of AI startups like xAI, with projected costs reaching billions of dollars annually. Musk's assertion of xAI's competitive advantage, coupled with plans to leverage existing business channels such as Tesla for product distribution, illustrates a multi-faceted approach to market penetration. However, xAI faces formidable challenges, including securing the necessary funding and negotiating complex cloud deals, amidst intense competition and the evolving landscape of AI technology.

Read more

Figma shareholders to sell almost $1B of stock

Figma's Employee Share Sale

Figma, the design collaboration startup, is facilitating a share sale allowing employees and early investors to collectively sell up to $900 million worth of shares. This move comes after lining up commitments from new and existing backers, resulting in a valuation of $12.5 billion. While a significant drop from Adobe's failed bid to acquire the company for $20 billion, this tender offer presents an opportunity for staff to cash out shares, particularly for those holding restricted stock units (RSUs), setting the stage for a potential future IPO.

Strategic Implications and Market Response

The offering, among the largest of its kind, positions Figma alongside other prominent private tech firms engaging in employee share sales amidst a subdued market for new public tech listings. With the inclusion of RSUs in the sale, Figma not only alleviates immediate financial pressures but also hints at a forthcoming IPO within the next few years. Investors' interest in these offerings reflects an appetite for discounted shares amid a decline in startup valuations. Figma's CFO, Praveer Melwani, emphasized the company's intention to eventually go public, although no specific timeline was provided. Despite the reduced valuation compared to previous offers, this deal marks a 25% increase from Figma's earlier valuation and underscores investor confidence in the company's growth trajectory and market potential.

Read more

Catch up on the latest:

• SF-based Snowflake to buy Reka AI for $1B (Link)

• Stability AI facing cash crunch discusses sale (Link)

Today’s whisper:

^{There will be a candlelight concert at St. Ignacius Church tomorrow evening where the Listeso String Quartet will perform Vivaldi’s Four Seasons & more! Don’t miss out on your opportunity to watch this incredible performance}