Elon Musk’s AI company — xAI — has acquired Hotshot, a startup specializing in AI-powered video generation tools. The acquisition suggests that xAI aims to enhance its capabilities in AI-driven video content creation, potentially positioning itself to compete with platforms like OpenAI’s Sora and Google’s Veo 2.
Founded in 2017 by Aakash Sastry and John Mullan, Hotshot is a New York-based startup specializing in AI-driven video generation tools. The platform offers diverse video styles, like comic book animations and rotoscope effects, catering to various creative needs. The company has developed three text-to-video foundation models, including Hotshot-XL, Hotshot Act One, and Hotshot. These models allow users to create up to 10-second videos at 720p resolution from text prompts.
The company’s video generation models have been trained on extensive datasets, with Hotshot utilizing 600 million video clips processed using thousands of GPUs. These models are seen as early indicators of the future of learning, entertainment, and communication.
“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,” Aakash Sastry wrote in a post on X.
Some news – We’re excited to announce that @HotshotSupport has been acquired by @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,… pic.twitter.com/W4rmYUxnMR
— Aakash (@aakashsastry) March 17, 2025
Speaking of funding, Hotshot successfully raised money from well-known venture capitalists and investors, including Lachy Groom (a prominent investor and former Stripe executive), Alexis Ohanian (co-founder of Reddit and investor), and SV Angel (a well-known VC firm that has backed major startups). However, the startup never publicly revealed how much amount it raised in funding rounds.
Following the acquisition, Hotshot announced it would discontinue new video creation starting March 14, 2025. The New York-based startup allows existing users until March 30 to download their previously created content.
Interestingly, Musk has previously hinted at developing video-generating models to integrate into xAI’s Grok chatbot platform, with expectations of releasing a ‘Grok Video’ model in the coming months. Notably, Elon Musk co-founded the AI trendsetter, ‘OpenAI’ in 2015 but left the organization in 2018 due to disagreements over its direction. He has since launched a rival AI company – xAI in 2023.
As the race to offer AI tools continues to intensify globally, big tech companies are increasingly focusing on video generation tools. After OpenAI and Google, software giant Adobe has also joined the competition with its latest artificial intelligence tool for creating AI-generated video clips. Last month, the company launched its text-to-video and image-to-video AI generator, called Generate Video (Firefly Video Model), for public testing.
Nowadays, the internet is almost full of AI-generated videos. According to recent estimates, around 58% of video ads shown on YouTube are AI-generated. Even, the global AI video generator market, valued at around $534 million in 2023, is projected to reach over $2.5 billion by 2032.
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