Nvidia Invests $2 Billion in xAI... Accelerating the AI Infrastructure Race

xAI Raises a Total of $20 Billion in Funding

Bloomberg News reported on October 9 (local time) that artificial intelligence (AI) semiconductor company Nvidia will invest $2 billion (approximately 2.8 trillion won) in xAI, the AI company led by Tesla CEO Elon Musk.

Reuters Yonhap News

The total amount of this funding round reaches $20 billion, with Nvidia planning to contribute up to $2 billion. The fundraising will be split between $7.5 billion in equity investment and $12.5 billion in debt, with Nvidia participating in the equity portion. According to sources, this funding round is larger than what xAI had initially planned.

Of particular note is a special purpose vehicle (SPV) being established separately as part of this funding, which will purchase Nvidia’s chips and lease them to xAI for five years. This model, which uses GPU assets as collateral rather than company equity, is drawing attention as a new way for technology companies to secure large-scale infrastructure funding while reducing debt burdens, Bloomberg News explained.

This deal is seen as a strategic move by Nvidia to boost customer investment in AI infrastructure. xAI is building the world’s largest data center, ‘Colossus,’ in Memphis, Tennessee. xAI plans to significantly increase the number of Nvidia GPUs installed there from the original target of 100,000 to as many as 1 million units.

xAI already raised about $10 billion in equity and debt financing earlier this year. Although CEO Musk stated on X (formerly Twitter) that “we have plenty of capital,” Bloomberg News reported that xAI is burning through $1 billion per month and is in need of additional funding.

This large-scale fundraising by xAI is part of the broader competition among technology companies to build out AI infrastructure. Major big tech firms are making successive investments worth tens of billions of dollars to develop top-tier AI models.

Previously, on October 6, OpenAI signed a multi-year agreement to use chips from semiconductor design company AMD. Meta also secured a $29 billion data center financing deal, while Oracle raised a $38 billion debt package to strengthen its AI infrastructure.