xAI Musk to raise $20 billion — more than expected

Elon Musk’s artificial intelligence startup xAI is set to raise $20 billion, more than it had initially planned, thanks to the participation of NVIDIA and several other companies, Bloomberg reports.

The new round of funding includes equity, including $2 billion from NVIDIA, and debt from a special purpose vehicle (SPV) that will purchase NVIDIA processors and lease them to Musk’s startup. xAI, in turn, will use the new chips in Colossus 2, the company’s largest data center, located in Memphis, Tennessee.

xAI’s financing will be split between about $7.5 billion in equity and up to $12.5 billion in debt through an SPV. The chips the company purchases will be leased to xAI for five years, allowing Wall Street financiers to recoup their investment. The unique deal structure, backed by GPUs rather than a company, could be a platform for tech firms looking to reduce debt risk, the publication notes.

Despite the new investment and a previous funding round this year, in which xAI raised $10 billion, Elon Musk’s startup will still need billions of dollars, as it spends about $1 billion a month. Musk is also trying to get his other companies, including SpaceX, to invest. Tesla shareholders will also vote later this year on whether to invest in xAI.

xAI isn't the only company in need of significant financial resources and processors. Earlier this week, OpenAI announced that it would purchase tens of billions of dollars in AI accelerators from AMD and could potentially take a 10% stake in the chipmaker. In total, the ChatGPT developer plans to spend up to $1 trillion on building out its AI infrastructure.