Market rumors indicate that xAI, the artificial intelligence startup of the world’s richest man Elon Musk, is negotiating with NVIDIA Corp. for a $20 billion lease-to-own plan to build a second large-scale data center “Colossus 2” in Memphis, Tennes...
Market rumors indicate that xAI, the artificial intelligence startup of the world’s richest man Elon Musk, is negotiating with NVIDIA Corp. for a $20 billion lease-to-own plan to build a second large-scale data center “Colossus 2” in Memphis, Tennessee.
Investing.com quoted The Information as reporting that xAI is pursuing a completely different approach from its competitors and hopes that most of the chips placed in the data center will be directly owned by it. In contrast, competitors such as OpenAI and Anthropic rely heavily on cloud service partners to provide computing power.
Since xAI is unable to raise all the funds to fund these plans, the startup is rumored to be relying on Valor Equity Partners, a long-time Musk backer, to raise the necessary funds. Valor is setting up a special purpose vehicle (SPV) to purchase NVIDIA chips to be leased to xAI, with an option to allow xAI to buy the chips at the end of the lease.
According to reports, NVIDIA will invest up to US$2 billion in the above-mentioned SPV to obtain equity. This arrangement transfers most of the financial risks to Valor, and Valor Chief Investment Officer Antonio Gracias is also a board member of Musk's SpaceX.
The market has just reported a few days ago that xAI’s latest round of fundraising is more than originally planned, and is expected to reach US$20 billion, including equity investment from NVIDIA. This funding will be tied to the NVIDIA graphics processor (GPU) xAI plans to use in “Colossus 2”. According to news, NVIDIA has invested up to US$2 billion in the equity portion of the fundraising.
PitchBook statistics show that NVIDIA participated in more than 50 venture capital projects of different AI companies in 2024, and this number will be exceeded in 2025. Some of these AI companies (including AI model developers and cloud service providers) will then use these funds to buy NVIDIA's expensive GPU products.
Further reading: Musk’s xAI expands fundraising to US$20 billion, NVIDIA will also participate in investment Jen-Hsun Huang calls Musk the "ultimate GPU" and is optimistic that the xAI supercomputer project will lead the world Musk calls Macrohard a company that can do anything, even make smartphones like Apple
