xAI to Raise $20 Billion After Nvidia and Others Boost Round

Core Insights - Elon Musk's artificial intelligence startup xAI is raising its funding round to $20 billion, exceeding initial plans, with backing from Nvidia Corp [1][3] - The financing structure includes both equity and debt, specifically through a special purpose vehicle (SPV) that will acquire Nvidia processors for xAI's Colossus 2 project [2][5] - Nvidia is contributing up to $2 billion in equity as part of this asset-backed transaction, which aims to support AI investments for its customers [3][4] Funding Structure - The total financing will consist of approximately $7.5 billion in equity and up to $12.5 billion in debt [5] - The SPV will purchase Nvidia processors, which xAI will rent for five years, allowing investors to recover their investments [5] - This innovative deal structure, secured by GPUs rather than the company itself, may serve as a model for other tech firms seeking to minimize debt exposure [5] Industry Context - The AI sector is experiencing significant investment activity, with major tech companies committing tens of billions to build necessary infrastructure for advanced AI models [4] - Recent deals in the industry include OpenAI's multi-year agreement with Advanced Micro Devices Inc. and Meta Platforms Inc.'s $29 billion financing for data centers [4]