Post by : Rameen Ariff

Elon Musk’s AI startup xAI is raising $20 billion in funding, with Nvidia Corp. among the key backers. The new financing plan includes both equity and debt through a special purpose vehicle (SPV) that will buy Nvidia processors and lease them to xAI for its Colossus 2 project, located at its largest data center in Memphis. Nvidia is reportedly investing up to $2 billion in the equity portion of the deal, aiming to accelerate AI development for its clients.

Earlier reports suggested a smaller funding round, but sources indicate that xAI is expanding the financing due to growing infrastructure needs. Musk had previously said on X that the company was “not raising any capital right now.”

The SPV structure will include approximately $7.5 billion in equity and up to $12.5 billion in debt, with xAI renting the Nvidia chips for five years. This arrangement allows investors to recover their funds while providing xAI with critical AI computing power.

The massive funding round highlights the ongoing surge in AI infrastructure investment. Companies like OpenAI, Meta, and Oracle have also made multibillion-dollar deals recently for AI chips and data centers. Nvidia has stated that it plans to use its financial strength to support AI adoption across the industry.

xAI’s funding need remains high, with reports suggesting the company spends around $1 billion per month. Musk has also sought investment from his other ventures, including SpaceX, while Tesla investors may vote on potential investment in xAI later this year.

This deal reflects the growing demand for high-capacity AI data centers and demonstrates innovative financing methods to expand AI capabilities while managing debt risk.

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