Nvidia reportedly signs another blockbuster AI supply deal, this time with Elon Musk's xAI — investment will support $20 billion Colossus 2 Memphis project

Elon Musk’s AI venture, xAI, is preparing to raise roughly $20 billion through a combination of equity and debt, with Nvidia playing a central role in the funding structure and chip supply. According to Bloomberg, the funds are being split between $7-$8 billion in new equity and as much as $12 billion in debt, routed through a special-purpose vehicle that will purchase Nvidia GPUs and lease them out to xAI. Nvidia itself is believed to be investing up to $2 billion into the equity portion, according to Bloomberg sources.

The arrangement effectively finances purchases of Nvidia’s own hardware, while ensuring that xAI secures priority access to GPUs during a period of tightening supply. It also gives Nvidia a foothold in one of the most aggressive AI training deployments in the United States. The chips are earmarked for Colossus 2, xAI’s 100 MW Memphis site, which came online earlier this year. Musk has plans to double the site’s GPU count to 200,000.

In September, Musk publicly denied rumors that claimed xAI was raising $10 billion at a $200 billion valuation, taking to X to say, “Fake news. xAI is not raising any capital right now.” The deal now described by Bloomberg is larger, more complex, and more tightly bound to Nvidia. Reuters confirmed that the chips would be used at xAI’s Memphis site, while others believe this to be a continuation of the AI industry's circular financing.

As for the chips, these may arrive before permanent grid infrastructure is in place. xAI is known to have turned to large-scale turbine deployments to meet power needs, drawing scrutiny from regulators and environmental groups, with many claiming that the company has installed and operated methane gas turbines without full permission — a claim the company has not disputed.

According to the Southern Environmental Law Center (SELC), a vocal critic of the project, states that a second Memphis site is under evaluation, with dozens more turbines planned. This second buildout could host between 40 and 90 methane gas turbines, generating up to 1.5 GW of electricity, which is far more than Colossus 2 is expected to consume in its initial phase. Documents reviewed by the SELC suggest both sites are part of a broader strategy to sidestep grid constraints by producing power on-site, regardless of environmental or permitting concerns.

If the financing closes at the size Bloomberg describes, xAI will have secured not just the GPUs needed to train at scale, but also the autonomy to run them on its own terms.

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