Elon Musk’s artificial intelligence startup, xAI, is making headlines again after expanding its fundraising round to a massive $20 billion, with significant backing from Nvidia. The move marks one of the largest AI financing efforts this year, underlining the growing race among tech giants to secure dominance in the AI infrastructure space.
Nvidia’s Billion-Dollar Play
According to Bloomberg, Nvidia is investing as much as $2 billion in the equity portion of xAI’s latest financing round. The structure of the deal includes both equity and debt through a special purpose vehicle (SPV) designed to purchase Nvidia’s advanced processors. These chips will then be rented to xAI for use in its Colossus 2 data center project in Memphis — one of the startup’s largest and most ambitious facilities to date.
This creative funding structure enables xAI to access cutting-edge GPUs without adding heavy corporate debt. Instead, the GPUs themselves act as collateral, offering investors a unique way to participate in the AI boom while reducing risk exposure.
Inside the $20 Billion Structure
The round reportedly includes $7.5 billion in equity and up to $12.5 billion in debt, according to people familiar with the matter. Major financial firms such as Apollo Global Management, Diameter Capital Partners, and Valor Capital are also part of the deal, with Valor leading the equity portion.
Nvidia’s strategic involvement aligns with its broader goal to accelerate AI deployment across industries. Earlier this year, the company’s CFO, Colette Kress, stated that Nvidia plans to use its growing cash reserves not only for stock buybacks and acquisitions but also to help other companies scale AI adoption faster.
Musk’s Expanding AI Vision
For Elon Musk, the funding boost is critical. xAI, which aims to rival OpenAI and Anthropic, has already raised about $10 billion in corporate equity and debt earlier this year. Bloomberg reported that the company is burning through nearly $1 billion per month as it rapidly scales data centers and hires AI researchers.
Musk has described AI as the backbone of his future ventures — from self-driving Teslas to humanoid robots. To sustain this vision, he has tapped into his wider business empire, including SpaceX, and is even considering involving Tesla shareholders in xAI’s future investments.
Nvidia’s Confidence in Musk’s Vision
In a recent interview with CNBC, Nvidia’s CEO Jensen Huang expressed strong enthusiasm for Musk’s AI ambitions. “Almost everything that Elon’s part of, you really want to be part of as well,” Huang said. “He gave us the opportunity to invest in xAI, and I’m just delighted by that.”
While Nvidia declined further comment, industry analysts see this partnership as a major endorsement of Musk’s AI goals. The chipmaker’s financial participation not only strengthens its foothold in the AI hardware market but also opens new opportunities for financing innovation through SPVs.
The Bigger Picture
The AI investment landscape is heating up fast. Earlier this week, OpenAI signed a multi-year chip deal with AMD, while Meta Platforms and Oracle secured multi-billion-dollar financing for new data centers. Experts estimate that U.S. tech companies have raised more than $150 billion in AI infrastructure financing so far this year — a 70% increase from 2024.
As competition intensifies, Nvidia’s partnership with Musk highlights how hardware, financing, and data infrastructure are converging in the race to dominate artificial intelligence.
If successful, this $20 billion deal could redefine how major tech companies fund AI development — and cement Nvidia’s place not just as a chipmaker, but as one of the key financiers shaping the future of AI innovation.
In other news also read about OpenAI’s New AMD Deal Marks Major Challenge to Nvidia’s AI Dominance
