xAI, the AI startup backed by Elon Musk, is increasing its current funding round to US$20 billion, sources told Bloomberg.

The round includes both equity and debt, with Nvidia investing as much as US$2 billion in equity, according to people familiar with the matter.

xAI plans to use the funds to acquire Nvidia GPUs for its Memphis-based data center, Colossus 2.

Some analysts view the arrangement as a form of vendor financing, with Nvidia indirectly enabling xAI to acquire its GPUs via structured investment rather than a traditional sale.

The financing is structured through a special purpose vehicle that will purchase the GPUs and rent them to xAI for five years.

Other investors reportedly include Apollo Global Management and Diameter Capital Partners, while Valor Capital is leading the equity portion of the deal, according to Bloomberg.

This approach allows the debt to be backed by hardware rather than the company itself.

xAI has already raised about US$10 billion in equity and debt this year, but is reportedly spending US$1 billion per month.

🔗 Source: Bloomberg

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