xAI, the artificial intelligence (AI) startup founded by Elon Musk, is expanding its fundraising to $20 billion (about 28.534 trillion won). Investors including U.S. semiconductor corporations Nvidia are participating, allowing the company to raise more than initially planned.
According to Bloomberg and other foreign media on the 7th (local time), the fundraising includes up to $7.5 billion (about 10.703 trillion won) in equity investment and $12.5 billion (about 17.338 trillion won) in liability. They plan to purchase Nvidia AI semiconductors through a special purpose vehicle (SPV), lease them to xAI, and use them for the Colossus2 project located in Memphis.
Through this financing structure, Wall Street investors can recoup their investment using graphics processing unit (GPU) asset as collateral. The nontraditional financial structure that secures collateral with GPUs, rather than the corporations themselves, is drawing attention as a new model that allows tech companies to raise capital while reducing liability burdens.
Nvidia is expected to commit up to $2 billion (about 2.854 trillion won) to the equity portion of the transaction. This is part of Nvidia's strategy to accelerate its customers' AI investments. The size of xAI's fundraising has grown beyond what Bloomberg previously reported and is said to have room to expand further.
Apollo Global Management and Diameter Capital Partners are participating in the liability financing of this transaction. The equity investment is being led by Valor Capital, and Apollo also joined as a partial direct investor.
Meanwhile, Musk's xAI already raised about $10 billion in equity and liability funding early this year, but it is burning more than $1 billion a month and still needs several billion dollars more. Musk is also channeling funds into xAI through his other corporations such as SpaceX, and at the end of the year Tesla shareholders will put to a vote whether Tesla will invest in xAI.