Standing inside the HumanX conference in San Francisco’s Moscone Center, it’s hard not to feel like you’re at the center of the AI universe. Technology leaders swarm the building, and the headquarters of OpenAI and Anthropic are just down the block. But a 70-person startup headquartered 5,000 miles away in Germany’s Black Forest—a region famous for its ham—has become a top competitor to Silicon Valley’s leading labs in AI image generation. In December, Black Forest Labs raised funds at a $3.25 billion valuation, after signing deals to power AI image-generation features in Adobe and the graphic design platform Canva. It has even struck agreements with major AI labs like Microsoft, Meta, and xAI to power similar features in their products. Nearly two years after launch, Black Forest Labs can afford to be picky about who it works with. In 2024, Elon Musk’s xAI tapped Black Forest Labs to power Grok’s first image generator. That partnership put Black Forest Labs on the map but generated a lot of controversy due to the chatbot’s limited safeguards. It ended months later when xAI developed an in-house AI image model. In recent months, xAI approached Black Forest Labs about licensing the startup's technology again, sources familiar with the matter tell WIRED. This time around, Black Forest Labs declined, the sources said, deeming it too operationally difficult to partner with xAI, which has a famously chaotic work environment. xAI did not immediately respond to WIRED’s request for comment. In September, Black Forest Labs struck a $140 million multiyear deal to give Meta access to its AI image-generation technology. These AI labs want to work with Black Forest Labs because its image generators are among the world's best, ranking just below OpenAI and Google's offerings on the third-party firm Artificial Analysis' benchmarks. The startup also offers some of the most downloaded text-to-image models on Hugging Face, indicating that a lot of AI image tools on the market ar