xAI revealed the culmination of a $20 billion funding round with participation from investors like Nvidia Corp., Valor Equity Partners, and the Qatar Investment Fund.
The agreement had been in development for a number of months. Bloomberg had previously indicated Nvidia’s intent to contribute as much as $2 billion. xAI did not share the magnitude of individual investor stakes, nor did it detail the arrangement of the round between debt and equity funding. Additional investors encompass Stepstone Group, Fidelity Management & Research Co., MGX and Baron Capital Group. Another strategic investor was the investment vehicle of Cisco Systems Inc.
“This capital will expedite the rollout of our top-tier infrastructure, facilitate the swift creation and implementation of game-changing AI solutions for billions globally, and bolster pioneering investigations within xAI’s central objective of comprehending the Universe,” the company conveyed in a statement.
xAI initially intended to structure the funding with around $7.5 billion in equity and a maximum of $12.5 billion in debt using a special purpose entity, according to individuals familiar with the matter. This setup would serve to acquire Nvidia processors, which xAI intends to lease over a five-year period, enabling Wall Street backers to recoup their investments. This unique structure, backed by GPUs rather than the firm’s own assets, could set a precedent for tech firms seeking to lessen their debt loads.
Data center capabilities are regarded as a pivotal element in crafting cutting-edge AI models, although the industry is debating the extent to which further expansions in computing resources truly enhance the technology. Simultaneously, xAI’s capital needs are particularly substantial. The organization, having already garnered approximately $10 billion in equity and debt financing by 2025, reportedly spends around $1 billion monthly and, as per sources, necessitates several billion dollars more.
Elon Musk also disclosed intentions to broaden its expansive xAI data center complex in Memphis. The company plans to acquire a third building in the vicinity, which will amplify its computing capacity for artificial intelligence to nearly 2 gigawatts.
The billionaire is also involving other companies within his business conglomerate, including SpaceX, to support xAI. In November, Tesla Inc. shareholders cast votes on a potential investment in xAI. While the “yes” votes outweighed the “no” votes, a noteworthy portion of shareholders abstained, Tesla General Counsel Brandon Earhart indicated. The company’s executive board will assess further actions based on the level of shareholder endorsement. The vote was non-binding, but Musk has publicly championed the notion and previously floated an investment of $5 billion.
Musk envisions artificial intelligence as the bedrock for many of his prospective products, encompassing self-driving vehicles and completely independent robots.
In its announcement, xAI also emphasized the prospects of Grok, its proprietary AI chatbot integrated with the X social platform. The product recently triggered concerns from watchdogs after enabling users to publish AI-generated depictions of individuals sans attire without their authorization, including minors.
Source: Bloomberg