Elon Musk’s artificial intelligence startup xAI is raising $20 billion in one of the industry’s largest funding rounds, with chipmaker Nvidia (Nasdaq: NVDA) investing up to $2 billion, Bloomberg News reported Tuesday.
The deal brings together roughly $7.5 billion from equity investors and as much as $12.5 billion in debt financing, according to people familiar with the matter who spoke on condition of anonymity. The funds will support xAI’s expansion of its Colossus supercomputer facility in Memphis.
Under the unusual deal structure, a special purpose vehicle will purchase Nvidia processors and lease them to xAI over five years. The arrangement uses the GPUs as collateral instead of xAI’s corporate assets, potentially providing a model for other tech firms managing infrastructure costs.
Nvidia’s investment is part of its strategy to accelerate AI adoption among customers. The chipmaker recently announced similar partnerships, including support for OpenAI‘s infrastructure expansion.
XAI’s existing Colossus supercomputer in Memphis now houses 200,000 Nvidia processors. The company is building a second facility, Colossus 2, which will house an additional 300,000 processors at an estimated cost exceeding $18 billion, according to The Wall Street Journal.
The massive data centers will consume more electricity than all homes in Memphis combined and require millions of gallons of water daily for cooling, the Journal reported. XAI announced plans in February for an $80 million wastewater treatment plant to recycle approximately 13 million gallons per day.
The funding is the latest major investment in AI infrastructure as tech companies race to develop more powerful systems. Other participants in the deal include Apollo Global Management and Diameter Capital Partners on the debt side, with Valor Capital leading equity investments.
Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
