Nvidia to fund chips for Musk's xAI as part of $20 billion deal - Bloomberg

Elon Musk's AI startup xAI will raise twice as much money as it originally planned: the startup managed to secure the support of investors such as Nvidia, Bloomberg writes, citing sources. xAI is known for its "not politically correct" chatbot Grok, but its key task is to create AI technologies for their integration into other products of Musk's companies.

Attraction of new investors, including Nvidia, allowed xAI to increase the volume of the current round of financing from $10 billion to $20 billion, according to Bloomberg sources. According to them, it is a scheme in which a special purpose vehicle (SPV) specially created for this project will buy chips from Nvidia and lease them for the Colossus 2 project - the largest data center of xAI - for five years with the funds raised through the placement of shares and borrowed funds. During this time, investors are expected to recoup their investment.

The unique structure of the deal, secured by chips rather than the company's own assets, could become an example for technology firms seeking to reduce their debt load, the agency said. Nvidia will invest up to $2 billion in the equity portion of the deal - the chip maker believes this strategy accelerates customers' investments in AI, sources said.

Nvidia shares rose 0.4% in over-the-counter trading on the U.S. Blue Ocean ATS. According to FactSet, Wall Street analysts on average forecast Nvidia's stock price to rise 19% year over year, with a consensus rating of "Buy".

The valuation of xAI, whose shares are not publicly traded, has tripled since the beginning of 2025.

Nvidia executives have said they will use the company's growing financial strength to accelerate AI adoption in the industry. In September, CFO Colette Kress said at a Goldman Sachs conference: Nvidia will buy back stock and make strategic acquisitions, but the priority is to direct free cash to getting customers to adopt AI faster.

Musk calls AI the foundation for many of his future products, from unmanned cars to fully autonomous robots. According to Bloomberg, xAI has already raised about $10 billion in debt and equity earlier in 2025, but it needs new funds: the rate at which it's burning through funds has reached $1 billion a month. Musk has also tapped other companies in his business empire - including SpaceX - to invest in xAI. Tesla shareholders will vote at their annual meeting in November on whether the automaker should also invest in the startup.

Large infusions have become the norm for the AI industry, with tech giants urgently spending tens of billions of dollars on infrastructure to train neural networks. This week, OpenAI announced a multi-year deal for AMD chips. Meta Platforms has struck several multi-billion dollar agreements in recent months, including a $29 billion funding package for data centers. Oracle has raised $38 billion in loans for its infrastructure.

This article was AI-translated and verified by a human editor