NVIDIA is teaming up with Elon Musk's AI startup xAI in a groundbreaking $20 billion chip agreement to compete with rivals like OpenAI and Anthropic. The deal places NVIDIA's growing role as the backbone of the global AI race. Experts believe that the partnership could redefine the AI industry and challenge OpenAI's dominance.

Elon Musk's artificial intelligence startup, xAI, raised more financing than initially planned, with backers including , bringing the total to $20 billion, according to reports.

Bloomberg reported that the financing includes both equity and debt in a special purpose vehicle that will purchase NVIDIA processors and rent them to for use in its Colossus 2 project, the largest data center site located in Memphis.

NVIDIA is expected to invest around $2 billion in the equity portion of the transaction, a strategy by the chipmaker to accelerate its customers' AI investments. XAI's fundraising effort, previously reported by Bloomberg at half the amount, may continue to grow.

XAI's financing would be split between approximately $7.5 billion of equity and as much as $12.5 billion of debt in the SPV, according to reports.