Musk’s xAI closed US$20 billion funding with Nvidia backing
The billionaire has also tapped his empire of companies, including SpaceX, for the startup backing
[NEW YORK] Elon Musk’s artificial intelligence (AI) startup xAI said that it has completed a US$20 billion funding round from investors including Nvidia, Valor Equity Partners and the Qatar Investment Authority.
The investment has been in the works for months, and Nvidia had planned to put in as much as US$2 billion, Bloomberg previously reported. XAI, which did not specify individual investment amounts or break out debt or equity portions of the round, said investors also include Stepstone Group, Fidelity Management & Research, MGX and Baron Capital Group. Cisco Systems’ investment group was the other strategic investor, the company said.
“This financing will accelerate our world-leading infrastructure buildout, enable the rapid development and deployment of transformative AI products reaching billions of users, and fuel groundbreaking research advancing xAI’s core mission: Understanding the Universe,” the company said.
XAI had planned for the financing to be split between about US$7.5 billion of equity and as much as US$12.5 billion of debt in a special purpose vehicle, sources familiar with the matter have said. The vehicle will be used to buy Nvidia processors, which xAI will use to rent chips out for five years, allowing Wall Street financiers to recoup their investment. The unique deal structure, backed by the GPUs as opposed to the company, could provide a playbook for tech firms looking to decrease debt exposure.
Data centre capacity is seen as a necessity for developing top AI models, though some have debated how much the computing power can improve the technology. Musk’s xAI is especially eager for capital. The firm, which already raised about US$10 billion of corporate equity and debt in 2025, still needs billions more, given the company has been burning through US$1 billion per month, sources familiar with the matter have said.
Musk’s xAI is planning for an expansion of its massive data centre complex in Memphis, purchasing a third building in the area that will bring the company’s AI computing capacity to almost 2 gigawatts, Musk has said.
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The billionaire has also tapped his empire of companies, including SpaceX, for xAI backing. Tesla shareholders in November voted on the idea of an investment in the company. Although Tesla received more votes in favour of the prospect than against, there were “a significant number” of abstentions, General Counsel Brandon Ehrhart said. The board will consider the next steps in light of the level of shareholder support. The vote was not binding, but Musk has been publicly supportive of the idea, floating the prospect of a US$5 billion infusion in 2024.
Musk has framed AI as the foundation for many of his futuristic products, including self-driving cars and fully autonomous robots.
In its announcement, xAI touted the potential for Grok, its AI chatbot which is integrated with its social media website, X. That product has caused alarm among regulators recently after allowing users to post images of people undressed by AI without their consent, including children. BLOOMBERG
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