Nvidia is reportedly investing two billion US dollars in xAI
xAI is to receive a total of 20 billion US dollars in investment. Nvidia is apparently contributing a tenth, but is also benefiting itself.
Two Blackwell GPUs from Nvidia, which will also be used by xAI.
(Image: Carsten Spille / heise medien)
According to reports, the AI start-up xAI is organising a new round of financing, which is currently said to have committed investments of 20 billion US dollars. Nvidia is reportedly participating with two billion dollars, with the money ultimately flowing back into its own coffers.
The news agency Bloomberg reports on the plans, citing sources said to be familiar with the negotiations. According to the report, the new capital will be used to create a special purpose vehicle that will buy AI accelerators from Nvidia and then lease them to xAI. The company allegedly wants to use the money to build its next supercomputer, Colossus 2 – Colossus (1) is one of the fastest systems in the world.
The 20 billion dollars are to come from two pots of money: 7.5 billion dollars in equity, for which xAI is selling its own shares, and 12.5 billion dollars in debt in the new special purpose vehicle. Nvidia's share is to belong to the equity side; Nvidia would thus receive xAI shares.
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Nvidia benefits
As the investment flows back to Nvidia through the purchase of AI accelerators, Nvidia's share would ultimately correspond to a discount of around two billion dollars for xAI or the new special purpose entity. Nvidia should be able to absorb this with a recent gross margin of 72.4 per cent. Shareholdings such as the one in xAI are an alternative way to classic share buybacks to increase the value of one's own shares with equity. This ultimately increases book turnover, which should make the stock market happy.
Bloomberg believes that this agreement with xAI could become a new standard model for investing in AI companies across the industry. In the deal with OpenAI, Nvidia skips the step with the special purpose vehicle and the leasing of GPUs and invests 100 billion dollars itself. OpenAI in turn buys Nvidia's AI accelerators and sells shares in the company.
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