Elon Musk's xAI Secures $20 Billion in a Bold NVIDIA-Powered Funding Gambit

Elon Musk’s xAI is on the brink of closing a substantial funding round, heavily tied to NVIDIA's chips, with an eye-catching figure of $20 billion. Sources indicate that this financing encompasses both equity and debt, strategically linked to NVIDIA graphics processing units (GPUs) planned for the Colossus 2 data center project in Memphis.

NVIDIA is reportedly committing up to $2 billion in equity as part of this deal, demonstrating the chip manufacturer’s strategy to accelerate AI investments by directly supporting clients. This move marks a significant increase compared to xAI's earlier reported figures, showcasing the expanding financial ambitions within the AI sector.

The structure of this $20 billion financing round is set to involve $7.5 billion in equity financing paired with up to $12.5 billion in debt financing. This uniquely crafted deal utilizes a special purpose vehicle (SPV) to purchase NVIDIA GPUs, which xAI will then lease over five years. This approach allows Wall Street financial institutions a mechanism to recoup their investments while potentially offering a replicable model for tech companies seeking to mitigate debt exposure risk.

Participating in the debt segment are major firms such as Apollo Global Management and Diameter Capital Partners. Meanwhile, Valor Capital is spearheading the equity component alongside Apollo’s participation. This financing strategy underscores the high-stakes environment of the tech world, where infrastructure costs demand unprecedented capital allocation.

For xAI, securing funds is crucial, as its operational expenditure reportedly reaches $1 billion monthly. Musk has mobilized resources within his business empire, including backing from SpaceX, and Tesla shareholders are set to vote on potential investments in xAI later this year. This underscores xAI’s pivotal role in Musk’s vision, supporting developments from autonomous vehicles to fully independent robotic systems.