Elon Musk’s xAI completes $20 billion funding round with Nvidia backing — All you need to know about the deal

Elon Musk’s artificial intelligence startup xAI said it has completed a $20 billion financing round from investors including Nvidia Corp., Valor Equity Partners and Qatar Investment Authority.

The investment has been in the works for months, and Nvidia had planned to invest as much as $2 billion, Bloomberg previously reported. XAI, which did not specify individual investment amounts or the debt or equity portions of the round, said investors included Stepstone Group, Fidelity Management & Research Co., MGX and Baron Capital Group. Cisco Systems Inc.’s investment group is the other strategic investor, the company said.

“This funding will accelerate our world-leading infrastructure build, enable the rapid development and deployment of transformative AI products that reach billions of users, and fuel groundbreaking research that advances xAI’s core mission: Understanding the Universe,” the company said.

XAI had planned to split the financing between about $7.5 billion in equity and about $12.5 billion in debt through a special purpose vehicle, people familiar with the matter said. The vehicle will be used to purchase Nvidia processors, which xAI will use to lease the chips for five years, allowing Wall Street financiers to recoup their investment. The company’s unique deal structure, powered by GPUs unlike any other, could provide a playbook for tech firms looking to reduce debt risk.

While some debate how much computing power can advance technology, data center capacity is seen as a necessity for developing the best AI models. Musk’s xAI is particularly keen on capital. The firm, which has raised about $10 billion in institutional equity and debt in 2025, still needs billions more given that it is burning $1 billion a month, people familiar with the matter said.

Musk said xAI plans to expand its massive data center complex in Memphis and purchase a third building in the area that would increase the company’s AI computing capacity to almost 2 gigawatts.

The billionaire also tapped his empire of companies, including SpaceX, for xAI support. Shareholders of Tesla Inc. voted to invest in the company in November. General Counsel Brandon Ehrhart said Tesla had a “significant number” of abstentions, even though there were more votes in favor of the possibility than against it. The board will consider next steps in light of the level of shareholder support. The vote was non-binding, but Musk publicly supported the idea, raising the possibility of $5 billion in funding in 2024.

This funding will accelerate our build-out of world-leading infrastructure, enabling the rapid development and deployment of transformative AI products that reach billions of users.

Musk has framed artificial intelligence as the basis for many of his futuristic products, including driverless cars and fully autonomous robots.

In its announcement, xAI touted the potential of its AI chatbot Grok, which integrates with social media website X. The product recently caused alarm among regulators after it allowed users to post images of people being undressed by AI without their consent, including children.