xAI closes $20 billion funding round with Nvidia contributing $2 billion as a major investor.

Elon Musk-owned artificial intelligence company xAI has secured its $20 billion funding round, with around $2 billion from chipmaker Nvidia Corp, according to Bloomberg. The deal, comprising equity and debt, will be tied to the use of Nvidia's graphics processing units in xAI's data centre, Colossus 2, located in Memphis. Nvidia declined to comment on the news, while an xAI representative did not respond.

Nvidia's involvement reflects the chipmaker's broader strategy for accelerating AI deployment across the industry. In September, Chief Financial Officer Colette Kress told the audience at a Goldman Sachs conference that Nvidia would repurchase stock and make strategic acquisitions where possible, but emphasized that "the priority was on using cash to help other companies use AI more quickly."

The AI industry has witnessed numerous multi-billion-dollar infrastructure deals in recent months. Earlier this week, OpenAI announced a deal to use Advanced Micro Devices Inc chips over multiple years, while Meta Platforms Inc signed a $29 billion financing package for data centres, and Oracle Corp raised a $38 billion debt package for its infrastructure. In the US bond markets alone, tech companies have raised about $157 billion this year — up 70% from last year.

xAI's substantial capital appetite underscores the enormous cost of building AI infrastructure. The firm, which already raised about $10 billion in corporate equity and debt earlier this year, requires additional billions given that it has been burning through $1 billion per month. Data centre capacity is seen as a necessity for developing top AI models, though some have debated how much computing power can improve the technology.