xAI seeks $20B in financing tied to Nvidia GPUs for Memphis Colossus 2

Elon Musk’s artificial intelligence startup xAI is lining up roughly $20 billion in new financing that would be tied directly to the graphics processors it plans to use at its Colossus 2 data center in Memphis, according to people with knowledge of the discussions. The package would include both equity and debt and would see chipmaker Nvidia invest as much as $2 billion in the equity portion, the people said.

The fundraising is being structured through a special purpose vehicle that would purchase Nvidia GPUs and lease them to xAI for a five year term. Overall commitments are reported to be about $7.5 billion in equity and up to $12.5 billion in debt, with Valor Capital leading the equity round and Apollo Global Management and Diameter Capital Partners participating in the debt tranche. Apollo is also reported to be putting money into the equity portion. Representatives for Nvidia and xAI did not provide comment when contacted. In September Musk posted on X that xAI was not raising capital at that time.

Under the proposed arrangement, the debt would be collateralized by the hardware rather than xAI’s corporate assets, allowing lenders to recover value through the GPUs if...