The financing includes equity and debt in a special purpose vehicle that will buy NVIDIA processors and lease them to XAI for use in its Colossus 2 project, said the people, who asked not to be identified because the information is private. This is the name of its largest data center site, which is located in Memphis.
Nvidia is investing up to $2 billion in the stock portion of the deal, the people said, a strategy by the chipmaker that helps accelerate its customers’ AI investments. Xai’s fundraising effort, previously reported by Bloomberg at half the amount, could continue to grow.
An Nvidia representative declined to comment. A spokesperson for XAI did not respond to a request for comment. Musk posted on X in September that the company was “not raising capital at this time.”
The massive funding is just the latest for the AI industry, which has seen major tech companies invest tens of billions at a frenetic pace in order to build the infrastructure needed to develop the best AI models. Earlier this week, OpenAI announced an agreement to use Advanced Micro Devices Inc. Chips over several years.
Meta Platforms Inc. has signed several multibillion-dollar deals in recent months, including a $29 billion data center financing package. Oracle Corp. also raised a $38 billion debt package for its infrastructure.
Xai’s financing would be split between about $7.5 billion of equity and up to $12.5 billion of debt in the SPV, the People said. The vehicle will be used to purchase NVIDIA processors, and Musk’s artificial intelligence startup would then lease the tokens for five years, allowing Wall Street financiers to recoup their investment. The unique deal structure, backed by GPUs versus enterprise, could provide a playbook for tech companies looking to reduce debt exposure.
Nvidia executives said they would use the company’s growing financial strength to accelerate the deployment of artificial intelligence across the industry. In September, Chief Financial Officer Colette Kress told the audience at a Goldman Sachs conference that NVIDIA is buying back stock and will make strategic acquisitions where possible, but the priority is to use money to help other companies use AI faster.
Apollo Global Management is participating in the debt raise, as is Diameter Capital Partners, the people said. Valor Capital is leading the equity portion of the deal, Bloomberg previously reported. Apollo is also investing.
A Diameter spokesperson declined to comment, while representatives for Apollo and Valor did not respond to requests for comment.
Data center capacity is considered a necessity for developing the best AI models, although some have debated how much computing power can improve the technology. In U.S. bond markets alone, tech companies have raised about $157 billion this year – up 70% from last year.
Musk’s XAI is particularly eager for capital. The company, which already raised about $10 billion in equity and corporate debt earlier this year, needs billions more, given that the company has been burning through $1 billion a month, Bloomberg reported. Musk also leveraged his empire of companies, including SpaceX, to invest in XAI. Later this year, Tesla Inc. investors will vote on whether the electric carmaker should also invest in XAI.
Musk has framed AI as the foundation for many of his futuristic products, including self-driving cars and fully autonomous robots.
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