Nvidia To Pump $2B In Equity Into Elon Musk’s xAI As Funding Round Swells To $20B: Report
Synopsis
XAI plans to raise a mix of debt and equity to fund the purchase of Nvidia servers and the expansion of its data centers.
Chip giant Nvidia will invest $2 billion as equity investment in xAI's ongoing funding round, which has now been raised to $20 billion and might grow even further, Bloomberg reported late Tuesday.
Elon Musk's AI company, which also houses the X social media platform, plans to raise $7.5 billion in equity and $12.5 billion in debt financing, primarily to fund its investments in AI infrastructure.
XAI's financing, previously pegged at $10 billion, would be structured through a special purpose vehicle, which would in turn purchase Nvidia processors, according to the report, which cited people familiar with the matter. XAI would then rent the chips out for five years, allowing Wall Street financiers to recoup their investment.
The Nvidia chips would be installed in Colossus 2, xAI's largest data center site, located in Memphis.
According to the Bloomberg report, Apollo Global Management and Diameter Capital Partners are lending to xAI in the round, while Valor Capital is leading the equity portion of the deal.
On Stocktwits, the retail sentiment was 'extremely bearish' for xAI, a privately-owned company, and 'bearish' for Nvidia as of late Tuesday.
The deal is just the latest in Nvidia's strategy to help accelerate its customers' AI investments. Last month, the chip giant announced a mammoth $100 billion investment in AI leader OpenAI.
Meanwhile, investors and AI companies are lining up billions of dollars for data centers and infrastructure necessary to support AI applications. Earlier this week, OpenAI announced a deal to use Advanced Micro Devices chips over multiple years. Meta has inked several multibillion-dollar deals in the past few months, including a $29 billion financing package for data centers. Oracle also raised a $38 billion debt package for its infrastructure.
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