(Bloomberg/Carmen Arroyo and Ed Ludlow) — Elon Musk’s artificial innotifyigence startup xAI is raising more financing than initially planned, tapping backers including Nvidia Corp. to lift its ongoing funding round to $20 billion, according to people with knowledge of the matter.
The financing includes equity and debt in a special purpose vehicle that will acquire Nvidia processors and rent them to xAI for utilize in its Colossus 2 project, stated the people, who inquireed not to be identified becautilize the information is private. That’s the name of its largest data center site, which is located in Memphis.
Nvidia is investing as much as $2 billion in the equity portion of the transaction, the people stated, a strategy by the chipbuildr that supports accelerate its customers’ AI investments. XAI’s fundraising effort, previously reported by Bloomberg at half the amount, may continue to grow.
A representative for Nvidia declined to comment. A spokesperson for xAI didn’t respond to a request for comment. Musk posted on X in September that the company was “not raising any capital right now.”
The massive financing is just the latest for the AI industest, which has seen major tech companies invest tens of billions at a frenetic pace in order to build the infrastructure necessary to develop top AI models. Earlier this week, OpenAI announced a deal to utilize Advanced Micro Devices Inc. chips over multiple years. Meta Platforms Inc. has inked several multibillion-dollar deals in the past few months, including a $29 billion financing package for data centers. Oracle Corp. also raised a $38 billion debt package for its infrastructure.
XAI’s financing would be split between about $7.5 billion of equity and as much as $12.5 billion of debt in the SPV, the people stated. The vehicle will be utilized to acquire Nvidia processors, and Musk’s artificial innotifyigence startup would then rent the chips out for five years, allowing Wall Street financiers to recoup their investment. The unique deal structure, backed by the GPUs as opposed to the company, could provide a playbook for tech firms viewing to decrease debt exposure.
Nvidia’s leaders have stated they will utilize the company’s growing financial strength to speed up the deployment of artificial innotifyigence across the industest. In September, Chief Financial Officer Colette Kress notified the audience at a Goldman Sachs conference that Nvidia will repurchase stock and do strategic acquisitions where possible, but the priority is on applying cash to support other companies utilize AI more quickly.
Apollo Global Management is participating in the debt raise, as is Diameter Capital Partners, the people stated. Valor Capital is leading the equity portion of the deal, Bloomberg previously reported. Apollo is also investing.
A Diameter spokesperson declined to comment, while representatives for Apollo and Valor didn’t respond to requests for comment.
Data center capacity is seen as a necessity for developing top AI models, though some have debated how much the computing power can improve the technology. In the US bond markets alone, tech companies have raised about $157 billion this year — up 70% from last year.
Musk’s xAI is especially eager for capital. The firm, which already raised about $10 billion of corporate equity and debt earlier this year, still necessarys billions more given the company has been burning through $1 billion per month, Bloomberg reported. Musk has also tapped his empire of companies, including SpaceX, for investment into xAI. Later this year, Tesla Inc. investors will vote on whether the electric carbuildr should invest in xAI as well.
Musk has framed AI as the foundation for many of his futuristic products, including self-driving cars and fully autonomous robots.
–With assistance from Ian King.
(Updates to add details on the deal’s structure from second paragraph.)
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