TLDR
- Apollo Global Management (APO) is nearing a $3.4 billion loan to finance an investment vehicle that will buy Nvidia chips and lease them to Elon Musk’s xAI.
- This marks Apollo’s second major xAI financing deal, following a similar $3.5 billion loan in November 2024.
- xAI burned over $1 billion monthly during the first nine months of 2025, spending $7.8 billion on data center infrastructure while generating only $210 million in revenue.
- The loan carries a 9.5% interest rate with potential annual returns exceeding 22% for investors under favorable conditions.
- Valor Equity Partners is arranging the deal as part of a larger $20 billion fundraising effort for AI chips and infrastructure.
Apollo Global Management is close to finalizing a $3.4 billion loan to an investment vehicle designed to purchase Nvidia chips and lease them to Elon Musk’s artificial intelligence company xAI. The deal could close as soon as this week.
This financing arrangement represents Apollo’s second major investment in a chip-leasing vehicle tied to xAI. In November, Apollo provided a similar $3.5 billion loan for the same purpose.
The structure allows xAI to access critical AI hardware without paying the full cost upfront. This becomes crucial as Musk pushes forward with plans to build some of the world’s largest AI data centers.
Apollo Global Management, Inc., APO
Valor Equity Partners, a longtime Musk backer, is arranging the transaction. The firm is working on a broader plan to raise $20 billion for AI chips and infrastructure.
The investment vehicle aims to raise $5.3 billion in total debt and equity. Apollo plans to invest equity in the vehicle alongside its lending position.
The loan is expected to carry a 9.5% interest rate. Valor has told investors that annual returns could exceed 22% under favorable scenarios.
xAI’s Cash Burn Rate Raises Questions
The financing need highlights just how cash-intensive xAI has become. During the first nine months of 2025, the company was burning more than $1 billion per month.
xAI spent $7.8 billion on property and equipment to build data centers for its Grok AI models. By comparison, the company recorded only $210 million in revenue over the same period.
Rivals like Anthropic and OpenAI generated billions in revenue during the same timeframe. The gap underscores the financial pressure on xAI as it races to compete.
Last week, Musk announced that SpaceX acquired xAI. The deal values the rocket company at $1 trillion and the AI firm at $250 billion.
Apollo’s Growing AI Infrastructure Portfolio
Apollo has deployed more than $40 billion into next-generation infrastructure since 2022. This includes investments in compute capacity, digital platforms, and renewable energy.
Over the weekend, Apollo announced its funds led $3.5 billion in financing for a roughly $5.4 billion data center compute deal. The transaction was also arranged by Valor and structured as a triple-net lease with Nvidia as an anchor investor.
Apollo estimates global data center infrastructure will require several trillion dollars of investment over the next decade. The firm is positioning itself to capture returns from the AI infrastructure boom.
Big tech companies are expected to spend more than $600 billion this year on advanced chips and data centers. Wall Street is increasingly structuring specialized vehicles to fund the explosive demand for AI compute infrastructure.
Wall Street analysts have a Strong Buy consensus rating on APO stock based on nine Buys, one Hold, and zero Sells. The average APO price target of $163.70 per share implies 19.3% upside potential.
xAI recently announced a $20 billion investment in Mississippi and raised another $20 billion in equity from investors including Nvidia, Valor, and the Qatar Investment Authority.
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