Elon Musk’s xAI Expands into Video AI with Hotshot Acquisition, to Compete with OpenAI’s Sora

xAI Expands AI Video Capabilities with Hotshot Acquisition

Elon Musk’s AI firm, xAI, has taken a major step in the AI video space by acquiring Hotshot, a startup known for its advanced video generation models.

The deal, confirmed on 18 March 2025, signals xAI’s intent to compete more aggressively in AI-driven video creation, an area currently led by OpenAI’s Sora and Google’s Veo 2.

Hotshot’s AI Video Models to Scale Under xAI’s Colossus Cluster

Founded in 2017, San Francisco-based Hotshot, co-founded by Aakash Sastry and John Mullan, initially focused on AI-powered photo editing.

Over the last two years, the company pivoted to text-to-video models, developing three notable video foundation models: Hotshot-XL, Hotshot Act One, and Hotshot.

These models have been widely recognised for their potential to transform education, entertainment, and communication.

In a post on X, Sastry shared his excitement about joining xAI:

“Over the past 2 years we’ve built 3 video foundation models as a small team — Hotshot-XL, Hotshot Act One, and Hotshot.

Training these models has given us a look into how global education, entertainment, communication, and productivity are about to change in the coming years. We’re excited to continue scaling these efforts on the largest cluster in the world, Colossus, as a part of xAI!”

The integration of Hotshot’s technology into xAI will be powered by Colossus, one of the largest AI computing clusters globally.

Users Advised to Retrieve Videos Before Shutdown

Following the acquisition, Hotshot has halted new video creation, giving existing users until 30 March 2025 to download any previously generated content.

The company had already begun this transition on 14 March, informing customers of the upcoming changes.

OpenAI Faces New Competition in AI Video Technology

With this acquisition, xAI is expected to introduce its own AI video models, likely integrated into its Grok chatbot platform.

Musk has previously hinted at a “Grok Video” model, stating during a livestream in January that it could be released “in a few months.”

This move places xAI in direct competition with OpenAI’s Sora, as well as other AI video startups like Runway ML and Pika.

Hotshot’s Funding and Industry Position

Before its acquisition, Hotshot secured investments from prominent venture capitalists, including Lachy Groom, Reddit co-founder Alexis Ohanian, and SV Angel.

However, the company never publicly disclosed the total amount of funding raised.

The financial details of xAI’s acquisition of Hotshot remain undisclosed, and it is unclear whether the entire Hotshot team will transition to xAI.

When asked, Sastry declined to comment on the employment status of his team.

Musk’s Longstanding AI Ambitions

This latest acquisition fits into Musk’s broader AI strategy, which has been marked by significant moves in the industry.

He previously co-founded OpenAI in 2015 but later distanced himself from the company’s direction.

In a notable attempt to regain influence in the AI space, Musk made a $97.4 billion offer for OpenAI, reflecting his long-term vision for competing in the sector.

While industry leaders and financial regulators have yet to respond to the acquisition, analysts predict that xAI’s expansion into video AI could drive innovation across various industries, shaping the future of AI-generated content.