Elon Musk is reportedly aiming to raise up to $12 billion for his company xAI, just weeks after securing $10 billion, as the costly race for artificial intelligence intensifies and infrastructure demands grow.

Partnership with Valor Equity and Plans to Acquire Hundreds of Thousands of Chips

According to sources cited by the Wall Street Journal, Musk's company xAI has struck a deal with Valor Equity Partners, led by longtime Musk backer Antonio Gracias. The fresh capital is expected to fund the leasing of a massive quantity of Nvidia GPUs, essential for training xAI's proprietary language model Grok.

Musk recently stated on X that xAI's goal is to deploy 50 million compute units equivalent to H100 chips within five years. The upcoming data center, Colossus 2, will serve as the backbone of this massive infrastructure.

Bold Ambitions but Minimal Revenue

Despite massive investments, xAI remains unprofitable. In 2025 alone, it reportedly burned through around $13 billion, while generating very limited revenue. Rather than relying on third-party cloud solutions like OpenAI or Anthropic, xAI chose to build its own infrastructure — a move that ensures independence but drastically increases costs.

To navigate this, Musk has reallocated capital from his other ventures. For example, SpaceX invested $2 billion into xAI, and the company also used Grok’s intellectual property as collateral for a $5 billion debt deal.

Colossus: 200,000 GPUs Built in Record Time

In a staggering feat, xAI built its first data center, Colossus, in Memphis, Tennessee in just 122 days, equipping it with 100,000 Nvidia GPUs. Just 92 days later, capacity doubled to 200,000 units.

Nvidia CEO Jensen Huang called this a "superhuman achievement", praising Musk’s unique understanding of engineering, systems architecture, and resource management.

How Will the New GPU Leasing Work?

The planned $12 billion raise is expected to follow a leasing model, in which Valor and other investors create a fund that borrows money to buy GPUs. xAI would then make leasing payments — but if it defaults, it risks losing access to the hardware and Grok itself.

In its previous $5 billion debt issuance, xAI offered investors a 12.5% yield, highlighting both high risk and investor enthusiasm for Musk-led projects.

What If xAI Fails to Repay Its Debts?

Lenders are concerned that AI chips lose value quickly due to evolving models and shifting demand. They are pushing for repayment within three years, along with strict credit limits.

If xAI fails to deliver, creditors could rent the Colossus infrastructure to other AI companies and seize rights to the Grok model, which underpins many of Musk’s AI ambitions.

Additionally, the deal limits xAI's ability to take on more than $5 billion in future debt, excluding new GPU leasing arrangements.

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