Elon Musk’s artificial intelligence startup xAI is poised to raise approximately $20 billion through both equity and debt financing. Nvidia is playing a central role in both the funding structure and the supply of critical chips in this massive funding round.

xAI is poised to increase its budget

Approximately $7-8 billion of the financing will be raised through new stock issuances, while up to $12 billion will be secured through debt. The debt financing will be channeled through a special purpose vehicle (SPV) that will purchase and lease Nvidia GPUs to xAI. Sources also indicate that Nvidia will directly invest up to $2 billion in this equity round.

This complex arrangement allows xAI to secure priority supply rights at a time when critical GPU supply is tight. It also allows Nvidia to finance the sale of its own hardware and gain a strategic position in one of the largest AI training infrastructures in the US.

The chips will be directed to the 100 MW Colossus 2 facility in Memphis, which began operations earlier this year. Musk plans to increase the number of GPUs at this facility to 200,000.

The chips to be used by xAI are expected to be delivered before the permanent grid infrastructure is completed. The company is known to build large-scale turbine systems to meet its energy needs. However, this has drawn criticism from environmental groups and regulators for failing to fully comply with the permitting process.

The company has not publicly denied allegations that it commissioned the methane gas turbines without obtaining the necessary permits. If the financing, as reported by Bloomberg, is completed, xAI will not only secure a massive GPU stockpile but also gain the freedom to operate them on its own terms.