Elon Musk’s AI venture, xAI, is advancing a major financing deal worth approximately $20 billion, with Nvidia playing a central role in both chip supply and investment. According to Bloomberg, the funding will consist of $7 to $8 billion in new equity and up to $12 billion in debt, channeled through a special-purpose vehicle designed to purchase Nvidia GPUs and lease them to xAI. Nvidia is expected to contribute up to $2 billion of the equity, effectively using its own hardware as the foundation of the financing structure. This arrangement not only secures xAI’s access to a vast supply of high-performance GPUs during a period of tight availability but also gives Nvidia a strategic stake in one of the most ambitious AI infrastructure projects in the U.S. The chips are intended for Colossus 2, xAI’s 100 MW data center site in Memphis, which began operations earlier this year. Musk has plans to double the site’s GPU capacity to 200,000 units. The deal marks a significant shift from earlier claims. In September, Musk publicly dismissed reports that xAI was raising $10 billion at a $200 billion valuation, calling them “fake news.” The current financing is larger, more complex, and deeply integrated with Nvidia’s supply chain—making it a pivotal moment in the AI infrastructure race. The scale of the project raises concerns about power infrastructure. Reports indicate that xAI is deploying large-scale methane gas turbines to meet the massive energy demands of its AI training operations, even before permanent grid connections are finalized. This has drawn criticism from regulators and environmental groups, including the Southern Environmental Law Center (SELC), which has documented that the company may have installed and operated these turbines without full regulatory approval—a claim xAI has not denied. Documents reviewed by the SELC also suggest a second Memphis site is under consideration, potentially housing between 40 and 90 additional methane gas turbines and capable of generating up to 1.5 gigawatts of electricity—far exceeding the initial power needs of Colossus 2. This dual-site strategy appears designed to bypass grid limitations by generating power on-site, regardless of permitting or environmental hurdles. If the financing closes as reported, xAI will not only secure the hardware needed for large-scale AI training but also gain significant operational independence. The project exemplifies a growing trend in the AI industry: circular financing models where tech giants fund infrastructure through their own products, creating self-sustaining ecosystems for AI development.