The artificial intelligence firm founded by Elon Musk, xAI, is reportedly teaming up with investment firm Valor Equity Partners to secure potential debt financing worth up to $12 billion.

Primary Use of Funds

The funds are expected to be mainly utilized for acquiring Nvidia chips to bolster the growth of xAI’s computing capabilities.

Data Center Infrastructure and AI Model Training

The new large-scale data center planned for xAI aims to support both training and operation of Grok, the company’s conversational AI model. This infrastructure will be leased by xAI, providing a flexible solution that avoids direct capital investment.

Loan Terms and Prospective Lenders

Some lenders in consideration are reportedly proposing terms with a three-year repayment timeline to mitigate their risk exposure. As of the publication date, neither xAI nor Valor Equity Partners have provided comments on the reports.

Competitive Landscape in AI Development

The development and operation of top-tier AI systems require significant investment due to hardware demands, computing power, and specialized expertise, which are becoming increasingly crucial as xAI faces competition from firms like OpenAI, Google, and DeepSeek in China.

A recent update on a social platform by an xAI representative indicated that the company is currently training Grok with 230,000 GPUs, including 30,000 of Nvidia’s GB200 chips. Additionally, plans are underway to activate a new GPU supercluster equipped with around 550,000 Nvidia GB200 and GB300 chips.

Despite recent estimates suggesting xAI might spend approximately $13 billion in 2025, earlier statements from Elon Musk indicated that the firm has enough capital to cover its immediate needs.