Artificial Intelligence company xAI is increasing its current funding round to $20 billion, Bloomberg News reports (unpaywalled copy). This, which is more than first expected, includes money from Nvidia, the main maker of GPUs that help run complex AI tasks.
The funding mixes equity and debt. Sources say this money will help buy Nvidia GPUs for Colossus 2, xAI's biggest data center in Memphis. Nvidia plans to put up to $2 billion into the equity part. This move helps Nvidia support its customers in growing AI projects faster. Earlier reports said the round was only half this size, and it might grow even more. Musk said on X in September that xAI was not raising money right now, but these details come from people close to the deal who stayed unnamed.
This big raise fits a trend in the AI world, where large tech firms spend billions to build the setups needed for advanced AI models. For example, OpenAI recently agreed to use chips from Advanced Micro Devices over years. Meta Platforms arranged $29 billion for data centers, and Oracle raised $38 billion in debt for its systems. In bond markets, tech companies have borrowed about $157 billion this year, up 70 percent from last year.
Details of the funding structure
The deal splits into about $7.5 billion in equity and up to $12.5 billion in debt. The debt is backed by the chips themselves, not the company, which could be a new way for tech firms to handle loans without high risk. Apollo Global Management and Diameter Capital Partners are in on the debt, while Valor Capital leads the equity. Apollo also invests in equity.
xAI needs this cash because it spends $1 billion a month and has already raised $10 billion this year. Musk has pulled investments from his other firms like SpaceX, and Tesla shareholders will vote soon on putting money into xAI. Musk sees AI as key for future products, like cars that drive themselves and robots that work on their own. Data centers are vital for top AI, though some question how much more computing power really improves it.