TLDR
- Elon Musk’s xAI is raising $20 billion through a combination of equity and debt financing
- Nvidia contributes up to $2 billion in equity and finances chip purchases through a special vehicle
- The funding splits into $7.5 billion equity and $12.5 billion debt for xAI’s Memphis data center
- Apollo Global Management and Diameter Capital join the debt raise while Valor Capital leads equity
- The AI startup burns through $1 billion monthly and needs capital for its Colossus 2 project
Elon Musk’s artificial intelligence company xAI is completing a $20 billion funding round with Nvidia as a major investor. The chipmaker is investing up to $2 billion in equity while also financing the purchase of its processors.
The deal represents a doubling of xAI’s initially reported fundraising target. Sources familiar with the matter confirmed the increased amount this week.
The financing uses a special purpose vehicle structure that will purchase Nvidia graphics processing units. XAI will then rent these chips for its Colossus 2 data center located in Memphis, Tennessee.
Funding Structure and Key Investors
The $20 billion raise divides into approximately $7.5 billion in equity and up to $12.5 billion in debt. The debt portion is backed by the Nvidia processors themselves rather than the company’s assets.
This unique structure allows xAI to rent the chips for five years. Investors can recoup their capital over this rental period.
Apollo Global Management is participating in the debt component of the deal. Diameter Capital Partners is also joining the debt raise.
Valor Capital is leading the equity portion. Apollo is investing in both the debt and equity segments of the financing.
Nvidia declined to provide comment on the transaction. XAI representatives did not respond to requests for comment.
High Operating Costs Drive Capital Needs
XAI has been spending approximately $1 billion per month on operations. The company previously raised about $10 billion in corporate equity and debt earlier in 2025.
Elon Musk has leveraged his other business ventures to support xAI. SpaceX has already invested in the AI startup.
Tesla shareholders will vote later this year on a potential investment in xAI. The electric vehicle maker could become another funding source for the AI company.
In September, Musk stated on X that xAI was not raising capital at that time. He later clarified the company would seek funding in the coming months.
AI Industry Fundraising Surge
The xAI deal reflects the broader trend of massive AI infrastructure investments. Tech companies have raised approximately $157 billion in US bond markets this year alone.
This represents a 70% increase compared to last year’s totals. Data center capacity is considered essential for developing competitive AI models.
OpenAI recently announced a multi-year agreement to use AMD processors. Meta Platforms has secured multiple deals worth billions, including a $29 billion data center financing package.
Oracle raised $38 billion in debt for its infrastructure expansion. Nvidia CFO Colette Kress told investors in September that the company prioritizes using cash to accelerate AI adoption.
Musk founded xAI in July 2023 as a competitor to OpenAI’s ChatGPT. The company aims to develop advanced AI models and products.
