TradingKey - Nvidia CEO Jensen Huang publicly confirmed the chipmaker’s investment in Elon Musk’s artificial intelligence startup xAI, following Bloomberg reports that the stake could be as large as $2 billion and people familiar with the matter said xAI’s latest funding round has already surpassed its initial target and is now poised to exceed $20 billion.
Nvidia is participating as a key equity investor in the round, and the entire financing structure is tightly linked to xAI’s plans to purchase Nvidia GPUs. The deal is being executed through a special-purpose vehicle (SPV), which will raise approximately $7.5 billion in equity and up to $12.5 billion in debt. The SPV will use the proceeds to buy Nvidia graphics processors, which xAI will then lease under long-term contracts to power its AI infrastructure.
Analysts say this unconventional structure—where debt is backed by physical GPU assets rather than the startup’s balance sheet—offers investors tangible collateral, reducing exposure to the high risks typically associated with early-stage AI ventures. For xAI, it avoids saddling the company directly with massive liabilities, keeping its financial statements cleaner.
The capital is primarily aimed at funding “Colossus 2,” xAI’s massive data center project in Memphis, underscoring the intensifying arms race in AI infrastructure. Tech giants have been pouring billions into building the computational backbone needed to train next-generation AI models. As analysts led by Vivek Arya at BMO Capital Markets noted in a report Monday, AI success increasingly hinges on how fast data centers can be built and whether reliable power and utilities are in place.
xAI is under acute pressure to secure funding. Bloomberg previously reported that the company raised roughly $10 billion through equity and debt earlier this year, but with monthly burn rates approaching $1 billion, it still faces a significant cash shortfall. Musk has already begun diverting resources from his other companies—SpaceX and Tesla—to support xAI. Later this year, Tesla shareholders will vote on a proposal to allow the electric-vehicle maker to invest directly in xAI.
On October 8, Nvidia shares rose 1.44% in U.S. trading following the announcement, extending gains that began in pre-market hours.
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