Musk's xAI nears $20 billion capital raise tied to Nvidia chips, Bloomberg News reports

Oct 7 (Reuters) - Elon Musk's AI startup xAI is raising more financing than initially planned, including an equity investment from Nvidia NVDA.O, to bring its ongoing funding round to $20 billion, Bloomberg News reported on Tuesday, citing people with knowledge of the matter.

Nvidia is investing as much as $2 billion in the equity portion of the deal, Bloomberg reported, adding that the financing, which includes equity and debt, will be tied to the Nvidia graphics processing units that xAI plans to use in its data center Colossus 2.

XAI's financing would be split between about $7.5 billion of equity and as much as $12.5 billion of debt, and is structured through a special purpose vehicle that will be used to buy Nvidia processors, the report said.

Nvidia declined to comment, while xAI did not immediately respond to a request for comment.

In September, Elon Musk denied a CNBC report that said xAI was raising $10 billion at a post-money valuation of $200 billion. Musk added that "xAI will of course raise capital in the coming months, just not right now."

Musk launched xAI in July 2023 as an alternative to OpenAI's ChatGPT.