After OpenAI and Meta, Elon Musk’s xAI secures $20 billion funding round with $2 billion from Nvidia — What we know

Elon Musk-owned artificial intelligence (AI) company xAI has secured its $20 billion funding round, with around $2 billion from chipmaker Nvidia Corp, Bloomberg reported on Wednesday, citing sources.

The sources added that the deal, comprising equity and debt, will be tied to the use of Nvidia's graphics processing units in xAi's data centre, Colossus 2, located in Memphis.

Nvidia declined to comment on the news, while an xAI representative did not respond, the report added.

Nvidia invests in xAI: What we know

• The equity part of Nvidia's investment is about $2 billion, Bloomberg reported, citing sources.
• xAI’s financing would be split between about $7.5 billion of equity and as much as $12.5 billion of debt, the sources said.
• The deal will be structured via a special purpose vehicle, which will then be used to buy Nvidia processors, they added.
• Musk’s startup plans to then rent the chips out for five years, allowing Wall Street financiers to recoup their investment.
• The plan is unique, with the debt backed by the GPUs instead of the company, the report said, adding that it “could provide a playbook” in the future for other tech firms looking to decrease debt exposure.
• Participants in the debt raise include Apollo Global Management and Diameter Capital Partners, the sources said, adding that Valor Capital and Apollo are part of the deal's equity portion.
• A Diameter spokesperson declined to comment, while representatives for Apollo and Valor didn’t respond to requests for comment, as per the report.

AI industry boom: Major players sign multi-billion dollar deals

The AI industry has seen numerous multi-billion-dollar deals recently as companies build the infrastructure necessary to develop top AI models.

Earlier this week, OpenAI announced a deal to use Advanced Micro Devices Inc (AMD) chips over multiple years; while Meta Platforms Inc signed a $29 billion financing package for data centres, and Oracle Corp also raised a $38 billion debt package for its infrastructure.

Nvidia’s leaders have said they will use the company’s growing financial strength to speed up AI deployment across the industry. In September, Chief Financial Officer Colette Kress told the audience at a Goldman Sachs conference that Nvidia would repurchase stock and make strategic acquisitions where possible, but the priority was on using cash to help other companies use AI more quickly.

Data centre capacity is seen as a necessity for developing top AI models, though some have debated how much 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 in corporate equity and debt earlier this year, still needs billions more, given that it has been burning through $1 billion per month, Bloomberg reported.

(With inputs from Bloomberg)