Elon Musk’s AI startup xAI could be next in line to turn heads with a highly unusual financing strategy, Bloomberg News reported Tuesday. The company, known for its Grok AI model, is reportedly exploring a $20 billion fundraising plan with Nvidia playing a central role.
The plan is unconventional. Rather than a typical investment or loan, the deal reportedly involves a mix of equity and debt structured through a special-purpose vehicle. That vehicle would purchase Nvidia chips and lease them to xAI, essentially letting the startup access the hardware it needs while Nvidia potentially benefits on multiple fronts.
Nvidia is not just supplying chips in this setup. The report suggests the graphics giant could invest up to $2 billion directly in the equity portion of the arrangement. That raises eyebrows because the structure creates a kind of “circular” financing loop: Nvidia would be selling hardware to a vehicle partially funded by its own money.
Neither company immediately commented on the report. Musk, however, said on X in September that xAI was not actively raising capital.
This deal, if it happens, would not be the first instance of creative funding in the AI space. Nvidia has demonstrated a strong appetite for partnership deals recently. The company announced plans to invest as much as $100 billion in OpenAI, which is building multiple data centers using Nvidia hardware. Earlier this year, Nvidia took a $5 billion stake in Intel Corp., a relatively smaller player in the AI market, and invested in CoreWeave Inc.’s IPO, which has already delivered paper gains.
Critics argue that circular arrangements like this could signal frothy conditions in the tech market. The concern is simple: money flows back and forth in a loop that may obscure underlying financial risk. Defenders, on the other hand, point out that Nvidia has the cash and sees strategic benefit in strengthening its AI ecosystem. Helping startups access high-end chips can create loyal partners, a bigger market for hardware, and future growth for the company.
Meanwhile, AI companies have been under intense pressure to secure computing capacity and hardware, and the costs are staggering. Just last month, OpenAI reportedly signed a multiyear cloud deal. Oracle Corp., meanwhile, recently closed an $18 billion bond deal with some 40-year maturities, reflecting the growing need for long-term financing to fund AI ambitions.
Bloomberg’s report breaks down xAI’s proposed $20 billion plan into $12.5 billion in debt and $7.5 billion in equity. The debt would be backed by the GPUs themselves, rather than by xAI as a standalone company, creating a novel structure that some analysts describe as “unique.”
As AI continues to reshape tech markets, deals like this highlight how companies are innovating not just in technology but in financing strategies. Musk’s xAI could be just the latest example of the lengths AI startups will go to keep pace in a race where hardware access is as critical as algorithms.
