xAI Secures $10 Billion for Sprawling Data Center and Collateralized GPUs

xAI secured a massive $10 billion in new funding to significantly expand its AI infrastructure, including deploying new graphics cards and building advanced data centers. The investment was comprised of $5 billion in equity funding and $5 billion in loans, some of which were structured as secured notes. It's a financing method where xAI provided collateral to lenders, a practice also observed among other AI market participants who have used graphics cards as collateral for debt.

Morgan Stanley assisted the company in raising these funds.

The capital is designated to significantly expand xAI's AI infrastructure. The company plans to deploy an additional 800,000 graphics cards to enhance its AI training capabilities. This expansion builds upon existing infrastructure, including a sprawling data center in Memphis, which houses the Colossus supercomputer. Colossus initially featured 100,000 graphics cards when it came online, a count that has since doubled as of May.

To further support its infrastructure roadmap, xAI acquired a 1 million-square-foot site in Memphis earlier this year for $80 million. This campus, strategically located near a power plant, is projected to host a data center capable of housing up to 350,000 graphics cards.

Addressing potential power supply fluctuations, particularly during periods of high household consumption, xAI has deployed over 165 Tesla Megapack energy storage systems at its new Memphis site. These batteries, manufactured by Tesla, each hold 3.9 megawatt-hours of electricity, sufficient to power approximately 3,600 homes for one hour. Alongside the energy storage array, xAI is constructing what it describes as the world’s largest ceramic membrane, a water treatment system designed to make wastewater suitable for data center cooling. This system is expected to enable the reuse of over 13 million gallons of wastewater per day.

xAI utilizes its Colossus supercomputer to power its Grok series of large language models. The newest addition to this series, Grok 3, debuted in February. It was trained using ten times more hardware than the company’s earlier large language models and demonstrates improved reliability in reasoning tasks.

This $10 billion investment marks the third multi-billion-dollar funding round for xAI since the beginning of 2024. A previous $6 billion raise, announced in November, valued the company at $50 billion. Following its merger with X in March, xAI's valuation increased to $80 billion.