Musk’s AI start-up raises $6 billion

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Friday recap
Wall Street was closed for Memorial Day on Monday, so here’s a recap of what happened on Friday. The Nasdaq Composite reached a new record high, fueled by Nvidia’s exceptional earnings report. Nvidia’s stock rose 2.6% on Friday, contributing to a 15% surge for the week, while the Nasdaq led major indexes with a 1.41% weekly gain. The S&P 500 closed 0.7% higher to end the week up 0.03%. However, the Dow Jones Industrial Average clocked its first weekly decline in five weeks even as it rose marginally on Friday. Treasury yields were little changed and oil prices bounced back from three-month lows. 

Nvidia CEO’s net worth soars
Nvidia CEO Jensen Huang’s net worth soared to over $90 billion as better-than-expected earnings sent the company’s stock soaring to a record high. Last Thursday, the stock rose more than 9% to close at nearly $1,038 per share. Huang owns about 86.76 million shares of Nvidia, or more than 3.5% of the company’s outstanding shares. Five years ago, Huang’s stake in Nvidia was worth roughly $3 billion.  

Investors told to reject Musk deal
Glass Lewis, a proxy advisory firm, has suggested Tesla shareholders to reject a $56 billion pay package for CEO Elon Musk, citing its excessive size, potential for stock dilution, and Musk’s involvement in multiple time-consuming projects. The package, voided by a judge in January, is tied to Tesla’s market value reaching certain targets. The firm also criticized a proposed move to incorporate Tesla in Texas. Tesla’s board defends the package, citing Musk’s role in the company’s growth. 

Google AI Overview misfires
Google‘s “AI Overview” feature in search is facing criticism for producing incorrect or controversial responses. Users shared examples of errors, such as stating Obama was a Muslim president and suggesting adding glue to pizza. While these issues highlight the challenges of AI-generated content, Google asserted most information was of high quality and the company was addressing the problems. Google’s Gemini image-generation tool had faced also faced issues, with users pointing out historical inaccuracies and questionable responses.  

$5.3 billion weight-loss plant
Eli Lilly is investing $5.3 billion to expand a manufacturing plant in Indiana due to high demand for its weight loss and diabetes drugs. This brings Eli Lilly’s total investment in the site to $9 billion, the largest in the company’s history. The plant, which will manufacture the active ingredient in both the drugs, is expected to be fully operational by 2028. The company is also investing in other manufacturing sites to meet the growing demand for these drugs.

[PRO] Overinvested in Nvidia?
While Wall Street is pretty bullish on Nvidia, with many analysts raising their price targets following last week’s blockbuster earnings, some investors may feel they are overexposed to the artificial intelligence chipmaker. CNBC’s Weizhen Tan looks at some stocks that may help diversify your portfolio.

Elon Musk‘s artificial intelligence startup, xAI, secured $6 billion in Series B funding, valuing the company at $24 billion. Notable investors include Andreessen Horowitz, Sequoia Capital and Saudi Prince Alwaleed Bin Talal. 

This funding comes close on the heels of Amazon’s additional $2.75 billion investment in AI startup Anthropic last month, bringing its total investment to $4 billion since September. While Amazon offers AI services through Amazon Web Services, it’s perceived to be lagging in the development of large language models, a field where OpenAI and Google (also an Anthropic investor) are leading the race to dominate the burgeoning $1 trillion AI market. 

AI models rely heavily on vast amounts of data for training, and Musk’s xAI has a built-in advantage with its chatbot, Grok, integrated into X. This provides access to an immense source of data and users. However, as Google’s recent struggles with its AI Overview demonstrate, the quality of training data is paramount. Google’s AI has been criticized for generating dubious advice and misinformation, underscoring the “garbage in, garbage out” principle. 

The importance of training data is further highlighted by two recent OpenAI deals. The first, a $250 million agreement with News Corp, grants OpenAI access to journalism from reputable sources like the Wall Street Journal, Barron’s and MarketWatch. This could help OpenAI’s chatbot understand journalistic standards and improve its impartiality, while also offering media companies a way to combat declining ad revenue.

The second deal, with Reddit, gives OpenAI access to over 100,000 forums, 306 million unique users, and 16 billion posts — a massive dataset of human interaction. While valuable for understanding online behavior, this raises concerns about exposure to the platform’s darker side of racism, misogyny, and religious bigotry, risks that Reddit has acknowledged in its IPO prospectus.

Musk’s amplification of far-right accounts on X and his advocacy for unrestricted free speech highlight the importance of monitoring potential biases that might arise in AI systems. The contrasting approaches to training data between OpenAI and xAI underscore the ethical considerations inherent in AI development. Although, what ChatGPT makes of Reddit’s r/wallstreetbets, Roaring Kitty and meme stocks — GameStop and AMC — is anyone’s guess. 

— CNBC’s Hakyung Kim, Brian Evans, Kif Leswing, Hayden Field, Annika Kim Constantino and Weizhen Tan contributed to this report.