Aug 1 (Reuters) - French artificial intelligence startup Mistral is in talks with investors, venture capital firms and Abu Dhabi's MGX to raise $1 billion at a valuation of $10 billion, the Financial Times reported on Friday, citing people familiar with the matter.

The company launched in June Europe's first AI reasoning model, which uses logical thinking to create a response, as it tries to keep pace with American and Chinese rivals at the forefront of AI development.

The funding would accelerate the commercial rollout of Mistral's Le Chat chatbot and support continued development of its large language models, the report said.

MGX and Mistral did not immediately respond to Reuters requests for comment.

The startup raised 600 million euros in a Series B funding round that valued the company at 5.8 billion euros last year.

Industry observers consider Mistral as Europe's best-positioned AI company to rival Silicon Valley leaders, though the French firm has yet to achieve comparable market traction or revenue scale.

Mistral counts Nvidia NVDA.O, Andreessen Horowitz and Lightspeed Venture Partners among its investors.

(Reporting by Akash Sriram in Bengaluru; Editing by Alan Barona)

((Akash.Sriram@thomsonreuters.com; On X as @HoodieOnVeshti; +91-99017-77617;))