Nvidia Will Finance Chips for Elon Musk's xAI as Part of $20 Billion Deal

Elon Musk’s artificial intelligence venture, xAI, is expanding its latest funding round to $20 billion, with participation from Nvidia Corp and several major financial institutions, as per the news reports. 

The fundraising effort, originally expected to be about half that size, includes both equity and debt financing and will be used to support xAI’s Colossus 2 data centre project in Memphis, its largest facility to date.

Deal Structure and Investor Participation

As per the news reports, the financing involves a special purpose vehicle (SPV) that will purchase Nvidia GPUs and lease them back to xAI for a period of 5 years. This structure allows investors to generate returns based on the value and usage of the chips rather than the company’s direct performance, providing a more asset-backed model of financing.

As per the news reports, of the total $20 billion, approximately $7.5 billion will be raised as equity, while $12.5 billion will come through debt. Nvidia is contributing as much as $2 billion in equity, reinforcing its strategy of supporting large-scale AI infrastructure development among its clients.

AI Industry’s Capital Surge

The xAI race underscores the massive capital race across the AI sector, as companies accelerate infrastructure investments to train and deploy next-generation models. Just this week, OpenAI announced a multi-year chip supply partnership with AMD, while Meta Platforms secured a $29 billion financing package for data centre expansion. Oracle Corp has also raised $38 billion in debt to fund its AI infrastructure.

According to Bloomberg reports, U.S. tech companies have raised about $157 billion in bond markets so far this year, marking a 70% increase from 2024.

Read More: Nvidia Share Price Hits All-Time High, Surpasses Microsoft to Become World's Most Valuable Company.

Conclusion

With Nvidia’s substantial participation and Wall Street’s growing appetite for AI-related assets, xAI’s $20 billion raise could serve as a blueprint for future tech financing. The Colossus 2 project positions Musk’s startup among the most capitalised players in the AI race, underscoring both the immense funding needs and the strategic importance of computational power in shaping the next era of artificial intelligence.

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