TLDR
- xAI closes $20 billion funding round with Nvidia investing $2 billion in equity
- Financing includes $7.5 billion equity and $12.5 billion debt through special purpose vehicle
- Nvidia processors will be purchased and rented to xAI for five years at Memphis facility
- Valor Capital leads equity round with Apollo Global and Diameter Capital joining debt portion
- xAI spends $1 billion monthly and previously raised $10 billion earlier in 2025
Elon Musk’s xAI has finalized a $20 billion funding round that doubles its original target. Nvidia is providing up to $2 billion in equity investment as part of the deal.
JUST IN: Nvidia $NVDA to take up to $2 billion equity stake in Elon Musk's xAI, Bloomberg reports. pic.twitter.com/FFMMGaaLI6
— Watcher.Guru (@WatcherGuru) October 7, 2025
The artificial intelligence startup will use the funds for its Colossus 2 data center in Memphis. The financing combines traditional equity with an innovative debt structure tied to Nvidia hardware.
People familiar with the transaction confirmed the details this week. Both Nvidia and xAI declined to comment or did not respond to media requests.
Innovative Chip Financing Structure
The funding arrangement uses a special purpose vehicle to purchase Nvidia graphics processing units. This vehicle will own the processors and rent them to xAI over a five-year period.
The $20 billion breaks down into roughly $7.5 billion in equity and up to $12.5 billion in debt. The debt is secured by the Nvidia chips themselves rather than xAI’s corporate assets.
This structure allows investors to recover their capital through rental payments. It could provide a template for other tech companies seeking to minimize balance sheet debt.
Valor Capital is spearheading the equity investment. Apollo Global Management is participating in both equity and debt portions of the raise.
Diameter Capital Partners has joined the debt financing. The diverse investor group reflects strong market interest in AI infrastructure projects.
Addressing Massive Monthly Burn Rate
XAI currently spends about $1 billion per month on operations. The company needs substantial capital to maintain its development pace and data center expansion.
Earlier in 2025, xAI raised approximately $10 billion in combined equity and debt. The new funding round brings total capital raised to $30 billion.
Musk has tapped his other companies for xAI support. SpaceX has already made investments in the AI venture.
Tesla shareholders face an upcoming vote on whether the automaker should invest in xAI. This could add another major funding source for the startup.
In September, Musk posted that xAI was not actively raising money. He later clarified that fundraising would occur in subsequent months.
Tech Industry AI Spending Boom
The xAI deal fits into a larger pattern of AI infrastructure investment. US tech companies have raised about $157 billion in bond markets during 2025.
This marks a 70% jump from 2024 levels. Companies view data center capacity as critical for competing in AI development.
OpenAI recently signed a multi-year chip supply agreement with AMD. Meta Platforms has completed several major deals, including a $29 billion data center financing package.
Oracle secured $38 billion in debt financing for infrastructure buildout. Nvidia’s CFO told investors the company prioritizes helping customers deploy AI technology faster.
Musk established xAI in July 2023 to compete with OpenAI’s ChatGPT. The startup focuses on developing AI models and autonomous technology applications.
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