Musk’s xAI in talks to raise $12 billion for AI chip expansion

xAI plans to use the upcoming capital infusion to build Colossus 2—a massive AI data center housing 550,000 Nvidia GPUs—to train its Grok chatbot, following Colossus 1, which has faced environmental concerns in Memphis

Elon Musk’s artificial intelligence venture, xAI, is reportedly seeking to raise up to $12 billion in fresh funding, just weeks after securing $10 billion, as it accelerates efforts to scale in the competitive AI space. The latest funding initiative is being coordinated by Valor Equity Partners, whose founder, Antonio Gracias, is a longtime associate of Musk, according to sources cited by the Wall Street Journal.

The capital infusion is intended to support the construction of a second high-powered data center, dubbed Colossus 2. This facility will serve as the backbone for training Grok, xAI’s proprietary chatbot, and will rely heavily on advanced Nvidia AI chips. Plans indicate the center will initially house around 550,000 cutting-edge GB200 and GB300 GPUs.

Currently, xAI operates Colossus 1 in Memphis, which is equipped with 230,000 GPUs and has already gained attention as one of the largest AI superclusters globally. Despite its technological significance, the facility has drawn environmental scrutiny over its use of gas-powered turbines.

Financially, xAI faces mounting challenges. Forecasts suggest the company could spend as much as $13 billion in 2025, prompting caution among lenders who are reportedly pushing for repayment terms within three years and limits on loan exposure.

Although Musk has publicly stated that xAI has sufficient capital, the startup has already raised at least $20 billion, including a $2 billion investment from SpaceX. With a current valuation of $75 billion, xAI remains in aggressive expansion mode, even as it has yet to establish a clear revenue model or path to profitability.