Nvidia to reportedly invest in xAI as part of $20bln funding

xAI’s financing would be split between about $7.5 billion of equity and as much as $12.5 billion of debt

The Elon Musk-backed artificial intelligence startup xAI is raising more financing than initially planned, including an equity investment from Nvidia, to bring its ongoing funding round to $20 billion, according to sources with knowledge of the matter.

The financing, which includes equity and debt, will be tied to the Nvidia graphics processing units (GPUs) that xAI plans to use in Colossus 2, said the sources. That’s the name of its largest data centre site, which is located in Memphis.

Nvidia is investing as much as $2 billion in the equity portion of the deal, the sources said, a strategy by the chipmaker that helps accelerate its customers’ AI investments. xAI’s fundraising effort, previously reported by Bloomberg at half the amount, may continue to grow.

xAI’s financing would be split between about $7.5 billion of equity and as much as $12.5 billion of debt, the sources said, and structured via a special purpose vehicle (SPV). The SPV will be used to buy Nvidia processors, and Musk’s AI startup would then rent the chips out for five years, allowing Wall Street financiers to recoup their investment.

The unique deal structure, with the debt backed by the GPUs as opposed to the company, could provide a playbook for tech firms looking to decrease debt exposure.

Apollo Global Management is participating in the debt raise, as is Diameter Capital Partners, the sources said. Valor Capital is leading the equity portion of the deal, Bloomberg previously reported. Apollo is also investing.

Musk’s xAI is especially eager for capital. The firm, which already raised about $10 billion of corporate equity and debt earlier this year, still needs billions more, given the company has been burning through $1 billion per month, Bloomberg reported.