TMTPOST -- Elon Musk's artificial intelligence startup xAI is set to close a $15 billion funding round at a $230 billion pre-money valuation next month, marking another massive capital influx into the artificial intelligence (AI) sector as competition intensifies among leading players.

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Sources familiar with the matter told CNBC on Tuesday that the allocation deadline is end of day Tuesday, with the round expected to close on December 19. The valuation represents a significant jump from the $113 billion xAI disclosed after acquiring Musk's social media platform X in March.

The funding underscores the intense investor appetite for AI companies, as firms building foundational models continue to raise billions despite elevated valuations. Musk called the CNBC report about the fundraising "false" in a post on X, though the latest reporting confirms those details.

This development follows earlier Wall Street Journal reporting last week that xAI was in advanced talks for the same funding amount and valuation. The new valuation underscores the continued appetite among investors to pour capital into companies building foundational AI models, despite the sector's cash-intensive nature.

The funding round adds to the billions already flowing into AI competitors, including OpenAI and Anthropic, which have reached sky-high valuations as the technology race accelerates.

The proposed $230 billion marks a dramatic increase for xAI in less than a year.When Musk announced the merger of xAI with X in March, the deal valued the combined entity at $113 billion. It was reported in September that the AI startup was looking to raise $10 billion at a $200 billion valuation. The terms were reportedly disclosed to investors by Jared Birchall, Musk's wealth manager.

Sources told CNBC that xAI plans to use a large portion of the new capital to fund graphics processing units (GPUs) responsible for powering large language models. The funding round reflects the sustained demand for AI infrastructure investments. Companies including OpenAI and Anthropic have raised billions at soaring valuations as investors pour money into firms developing large language models.

OpenAI finalized a $6.6billion share sale at a $500 billion valuation last month, with Reuters reporting the ChatGPT maker is eyeing a $1 trillion in initial pubic offering (IPO).Its competitor Anthropic closed a $13 billion funding round in September that roughly tripled its valuation from March.

In June, xAI raised $5 billion in equity and $5 billion in debt to build out its Colossus datacenter in Memphis, Tennessee. SpaceX, another Musk’s company, invested $2 billion in that round, the Wall Street Journal previously reported.

XAI is responsible for creating the Grok chatbot, which competes with ChatGPT. The company recently debuted Grokipedia, an AI-powered competitor to Wikipedia. News Corp, owner of the Wall Street Journal, has a content-licensing partnership with OpenAI.

Like other AI startups, xAI is burning cash rapidly as it seeks to improve its Grok chatbot, which competes with ChatGPT. The companies are laying groundwork for trillions of dollars in spending in coming years.

The startup has recently lost several senior executives, including X CEO Linda Yaccarino and the chief financial officers of both X and xAI, the Journal reported. xAI's Grok chatbot has faced criticism for disseminating hate speech, including antisemitic content.