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Elon Musk’s artificial intelligence startup xAI has raised $20 billion in fresh financing, according to Bloomberg, with $2 billion of that amount coming directly from Nvidia as part of the equity package.
The new round is larger than originally expected and is tied to xAI’s plan to use Nvidia processors for Colossus 2, its biggest data center located in Memphis.
The total package mixes equity and debt. Reports show that about $7.5 billion is equity while as much as $12.5 billion comes in debt. The deal is structured through a special purpose vehicle that buys Nvidia GPUs and rents them back to xAI for five years, giving financiers a path to recover their money without exposing themselves to company-level risk.
Nvidia has not commented on the transaction, while xAI also declined to respond. Elon himself wrote on X in September that the company was “not raising any capital right now,” though this financing proves otherwise.
Nvidia invests while Wall Street funds the debt
Nvidia is investing equity as a strategy to push its chips deeper into customer systems. The company’s Chief Financial Officer Colette Kress told a Goldman Sachs conference in September that while Nvidia will continue to repurchase shares and pursue strategic deals, its main use of cash is to help other companies adopt AI more quickly.
Other financiers are backing the debt. Apollo Global Management is participating alongside Diameter Capital Partners. Valor Capital is leading the equity portion, with Apollo also investing. None of these firms gave public comment when contacted.
The raise is more than double the earlier $10 billion figure reported earlier this year, showing the scale of demand for hardware and financing in the AI race.
The debt itself is unusual because it is backed by Nvidia’s processors instead of the company. By renting chips for a set period, xAI provides investors with predictable returns while keeping corporate liabilities separate.
The arrangement is being seen as a potential model for other tech firms aiming to secure capital without stacking too much debt directly on their books.
AI giants secure record amounts for infrastructure
The deal comes in the middle of unprecedented capital raising across the AI sector. OpenAI announced a multi‑year partnership to run its systems on Advanced Micro Devices chips. Meta has agreed to a financing deal worth $29 billion for data center expansion.
Oracle pulled together $38 billion in debt for its infrastructure. Altogether, tech companies in U.S. bond markets have secured $157 billion so far this year, a 70% increase compared with last year.
For Elon, this capital is critical. Bloomberg reported that xAI has already burned through $1 billion per month while building its infrastructure.
Earlier this year, the company raised about $10 billion in a mix of debt and equity. Elon has also drawn on his other companies, with SpaceX already investing in xAI. Later this year, Tesla investors will vote on whether to put money into the startup as well.
Data center capacity remains a central issue in AI development, as training large models requires huge computing power. While some in the industry debate how much more power will actually improve results, few argue against the need to secure hardware at scale.
Elon has positioned AI at the center of his product vision, describing it as the foundation for self‑driving vehicles and fully autonomous robots.
