AI Funding Soars: $20B xAI Raise & $250M Merge Labs Seed Signal Big Trends

The AI investment landscape as of early 2026 reflects two converging forces: hyper-aggressive capital deployment into frontier compute and model capability, and emergent bets on augmenting human intelligence and interaction via brain-computer interfaces.

xAI’s $20 B raise stands out not just for its size—which surpasses previous records—but for its terms. By exceeding a $15 billion target, bringing aboard both financial and strategic investors, and tying part of the future capability to control over infrastructure (Colossus I & II, over 1 million H100 GPU equivalents), xAI is effectively buying a dominant position in compute capacity. The inclusion of Nvidia and Cisco as strategic backers further strengthens its supplier relationships, potentially improving access to hardware and networked infrastructure.

Merge Labs’ seed round, meanwhile, illustrates how leading firms are investing in research that bridges biology and AI. Using non-invasive ultrasound and molecule-based sensor technology, Merge aims for high bandwidth brain interfaces without implants—different from Neuralink’s surgical electrode approach. The involvement of OpenAI not just as investor but collaborator (work on foundation models tied into bioengineering and neuroscience) points toward a longer-horizon strategic play: biological integration could become a new input channel for AI, with applications in health, augmented cognition, and AI-mediated human interaction.

Funding trends in 2025 show a large volume of capital flowing to AI, especially to foundation model labs. Global AI funding more than doubled from ~$114 B in 2024 to ~$202 B in 2025. Around 40 percent of that went to model developers. OpenAI and Anthropic alone soaked up ~14 percent of all AI investment globally. Furthermore, the U.S. accounted for approximately 79 percent of funding, with the San Francisco Bay Area alone raising nearly $122 B.

Strategic implications: Companies with large compute and data scale are further cementing advantages. Partnerships with hardware suppliers (e.g., Nvidia) are now strategic imperatives, not just cost centers. The rise of BCI means that interactions beyond screen and keyboard are being explored, with both opportunity and enormous risk—safety, privacy, regulatory, and technical reliability. Investors will need to discern which models of human-AI fusion are viable, and who owns critical dependencies (hardware, neural data, regulatory compliance).

Open questions include whether xAI can monetize quickly enough to service such an enormous capital expenditure; whether Merge Labs’ non-invasive technology can match the functional performance of implants; how regulators will respond to AI infrastructure draw on power grids and environmental footprint; and whether current AI valuation multiples can sustain if model performance or safety issues arise.