Elon Musk’s artificial intelligence startup xAI is ramping up its ambitions with a massive $20 billion financing round, tapping strategic backers including chip giant Nvidia Corp., according to sources familiar with the matter, Bloomberg reported. The move highlights the escalating race to build the infrastructure needed for next-generation AI models, as tech titans pour tens of billions into supercomputing capacity.
At the heart of the funding is a special purpose vehicle (SPV) designed to buy Nvidia processors and rent them to xAI for use in its Colossus 2 project — the company’s largest data center located in Memphis. Nvidia is investing up to $2 billion in the equity portion of the deal, a strategy that helps accelerate AI adoption across the industry. Previously, xAI’s fundraising was reported at half the current amount, but sources indicate the round may continue to expand.
The structure of the deal is unique: roughly $7.5 billion will come from equity and $12.5 billion from debt, with the SPV itself using Nvidia GPUs as collateral. xAI will rent the chips for five years, allowing investors to recoup funds while minimizing risk exposure for the startup. Analysts say this could set a new blueprint for tech companies seeking to scale AI operations while managing debt effectively.
This $20 billion raise is part of a broader trend in AI investment. Earlier this week, OpenAI announced a multiyear agreement to use AMD chips, while Meta Platforms has secured over $29 billion in financing for its AI data centers. Oracle also closed a $38 billion debt package to fund infrastructure, underscoring the competitive push to expand data center capacity. Apollo Global Management and Diameter Capital Partners are participating in the debt portion, while Valor Capital is leading the equity tranche.
xAI’s appetite for capital remains voracious. The company, which raised about $10 billion earlier this year, reportedly burns through $1 billion each month. Musk has also tapped into his other ventures, including SpaceX, and Tesla shareholders will vote later this year on whether the electric carmaker should invest in xAI. Musk positions AI as the cornerstone of his futuristic vision — from self-driving cars to fully autonomous robots — making the funding round a critical step in realizing these ambitions.
With Nvidia and top investors backing the ambitious project, xAI’s Colossus 2 data center could become a cornerstone of the next wave of AI innovation, setting the stage for a transformative era in computing and technology.
