Nvidia to Invest in Elon Musk’s xAI under $20 Bn AI Deal

Billionaire Elon Musk's artificial intelligence (AI) startup, xAI, is raising $20 billion in funding, with Nvidia Corp among the investors.

xAI's funding consists of both equity and debt through a special purpose vehicle (SPV) that will purchase Nvidia processors and lease them to xAI for its Colossus 2 project, the company's largest data center located in Memphis.

Key Highlights

• Nvidia is investing up to $2 billion in xAI’s $20 billion capital raise.
• The funding round includes both equity and debt, structured through an SPV tied to Nvidia chips.

xAI's funding structure and Nvidia's role

According to the report, Nvidia, led by CEO Jensen Huang, plans to invest nearly $2 billion in the equity portion of the transaction. The move is consistent with the chipmaker's overall strategy to accelerate customers' AI development.

xAI's financing round, which was initially estimated to be roughly half the size it is now, could still expand. It includes approximately $7.5 billion in equity and up to $12.5 billion in debt via the SPV.

Under the structure, the SPV will purchase Nvidia processors, which xAI will lease for five years. This design enables Wall Street investors to gradually recover capital, while the loan is secured by the GPUs rather than the company. The structure could serve as a model for other technology companies seeking to manage high debt exposure.

Apollo Global Management and Diameter Capital Partners are involved in the debt portion of the financing, while Valor Capital is leading the equity round. Apollo is also investing directly in xAI.

The latest investment comes after Musk's recent statement on X that xAI was "not raising any capital right now."

AI industry sees a wave of mega funding

The agreement represents another milestone in a year marked by massive AI infrastructure funding. Major technology companies have spent tens of billions of dollars on data center and chip expansion projects.

Earlier this week, OpenAI announced a multiyear agreement to use Advanced Micro Devices (AMD) chips, while Meta Platforms Inc. secured a $29 billion financing package for data centers. Meanwhile, Oracle Corp. raised $38 billion in debt to expand its cloud and artificial intelligence operations.

Also Read: Elon Musk Becomes First Half-Trillionaire

Nvidia's growing AI influence

Nvidia executives have stated that the company will use its growing financial strength to accelerate AI adoption across industries. 

At a Goldman Sachs conference in September, Chief Financial Officer Colette Kress stated that Nvidia intends to use cash reserves for strategic acquisitions and share buybacks, but its top priority remains enabling partners to develop and deploy AI more quickly.

Musk’s xAI eyes more capital as burn rate rises

Despite its increasing valuation, xAI is said to be looking for funding. The startup, which previously raised approximately $10 billion in equity and debt, reportedly spends nearly $1 billion per month.

Musk has used his other ventures, including SpaceX, to help fund xAI's operations. Later this year, Tesla shareholders will vote on whether the electric vehicle manufacturer should invest in the AI company.

Musk has positioned AI as the foundation for a number of his futuristic projects, including self-driving cars and autonomous robots.