Elon Musk's AI startup xAI is in talks with investors for a funding round that would value the company at around $40 billion, The Wall Street Journal reported Tuesday, citing people familiar with the matter.

xAI hopes to raise several billion dollars in the new funding round, WSJ said, adding that the cash raised would be added to the $40 billion valuation.

The funding discussions are in the early stages, which means that terms could change or the talks could fall apart, the report said.

Elon Musk did not immediately respond to a Reuters request for comment.

The startup raised $6 billion in series B funding in May, reaching a post-money valuation of $24 billion, backed by investors that included Andreessen Horowitz and Sequoia Capital.

Musk, the billionaire entrepreneur, launched xAI in July 2023 as an alternative to OpenAI's ChatGPT.

In March, xAI said it would open-source its ChatGPT challenger "Grok," giving the public free access to experiment with the code behind the technology, aligning xAI with firms such as Meta and France's Mistral, which also have open-source AI models.

Companies like Microsoft-backed OpenAI and Alphabet's Google are among those leading the fierce race for generative AI dominance, driving significant investments and innovation in the rapidly evolving landscape.

Earlier in October, OpenAI raised $6.6 billion in funding from investors, which could value the company at $157 billion and cement its position as one of the most valuable private companies in the world.