Elon Musk’s xAI secures $20B boost as Nvidia, Apollo, and Valor back data centre expansion

Elon Musk’s artificial intelligence company xAI is scaling up its ambitions with a massive $20 billion funding round, backed by Nvidia, Apollo Global Management, and Valor Capital, Bloomberg reported.

The financing marks one of the largest in the AI industry this year, combining equity and debt to accelerate xAI’s Colossus 2 data centre project in Memphis.

The new capital is set to finance Nvidia processors through a unique leasing model.

Nvidia’s $2 billion investment deepens its AI dominance

According to the report, Nvidia is contributing as much as $2 billion to the equity portion of xAI’s latest fundraising, solidifying its role at the centre of the global AI ecosystem

The financing, reportedly structured through a special purpose vehicle (SPV), will see the purchase of Nvidia’s graphics processing units (GPUs), which will then be leased to xAI for five years.

This model provides a capital-efficient path for the company while allowing investors to recoup funds through the leased assets rather than the startup itself.

The financing structure includes approximately $7.5 billion of equity and up to $12.5 billion of debt, as per the report.

Apollo Global Management and Diameter Capital Partners are participating in the debt portion, while Valor Capital leads the equity round, the report added.

The approach mirrors a growing trend among technology firms using asset-backed financing to build large-scale AI infrastructure amid rising borrowing costs.

Data centres at the heart of AI’s trillion-dollar race

The Colossus 2 facility, located in Memphis, represents xAI’s largest data centre project yet and a cornerstone of its efforts to train advanced AI models.

Data centres have become the backbone of artificial intelligence development, prompting tech giants and investors alike to pour billions into new facilities.

In the US bond markets alone, technology companies have raised about $157 billion this year, marking a 70% jump from the previous year.

Meta Platforms recently raised $29 billion for its own data centre expansion, while Oracle secured $38 billion in debt for infrastructure projects.

OpenAI also signed a multi-year deal to source chips from Advanced Micro Devices, underlining the intense competition for computing power.

Nvidia’s strategy aligns with its broader goal of speeding up AI adoption across industries.

The company has signalled plans to use its strong balance sheet to repurchase stock, acquire strategic assets, and help clients implement AI capabilities faster.

Its involvement in xAI underscores a deeper integration between chipmakers and AI developers as both push to meet growing demand for computational capacity.

Musk leverages his corporate network to sustain growth

xAI’s appetite for capital reflects Musk’s broader vision to embed AI into his technology portfolio, spanning self-driving cars, robotics, and automation, according to Bloomberg.

The firm has already raised about $10 billion earlier this year, but continues to seek additional financing amid heavy infrastructure spending.

Reports indicate that xAI has been burning close to $1 billion each month, fuelling speculation about the sustainability of its rapid growth model.

Bloomberg also reported that Musk has drawn on his wider corporate network for support.

SpaceX has invested in xAI, and later this year, Tesla shareholders are expected to vote on whether the electric carmaker should allocate funds to the AI company.

Musk has positioned artificial intelligence as a key enabler of his future products, from fully autonomous vehicles to humanoid robots.