Igor Babuschkin, a cofounder of xAI, is in talks to raise up to $1 billion in initial financing for his new AI research startup, River AI, at a valuation of up to $5 billion.
General Catalyst is in talks to lead the investment. Babuschkin also plans to commit up to $100 million of his own capital to the company, according to sources familiar with the deal.
River AI positions itself as a "neolab," focusing on long-term AI research rather than near-term product sales. Its mission centers on building personalized AI that users own, designed to run on local servers for homes and small businesses.
Babuschkin departed xAI in August 2025. He was a core builder, contributing to the training infrastructure for xAI's models and playing a key role in developing the Memphis supercluster, which Anthropic now leases for its Claude chatbot.
xAI underwent significant changes after Babuschkin's exit. SpaceX acquired xAI for $250 billion in February 2026. By May, Elon Musk said xAI would dissolve as an independent entity and rebrand as SpaceXAI, with SpaceX directly selling its AI products.
River AI's funding round ranks among the largest for recent AI research startups. Richard Socher's Recursive Intelligence raised $650 million at a $4.65 billion valuation. David Silver's Ineffable Intelligence secured $1.1 billion to pursue AI that learns without human training data.
The focus on local, user-owned AI contrasts with the cloud-centric model dominating the industry, offering a competitive moat built on data privacy and direct user control rather than usage-based cloud billing.
Babuschkin's prior experience includes more than four years at Google DeepMind as a senior research engineer, where he worked on AlphaStar. He later served as a technical staff member at OpenAI before the launch of ChatGPT.
River AI was incorporated in Nevada on April 20, 2026. The funding discussions are ongoing, and the final deal size could change as negotiations progress.
