xAI To Raise $6 Billion For 100,000 NVIDIA AI Chips, Which Face Overheating Issues

The race to acquire high-powered microchips that power the development and deployment of artificial intelligence (AI) software applications and products has never gone cold.

In fact, since the emergence of the amazing generative artificial intelligence (GenAI), the race has only heated up with all the top technology companies vying for the most advanced and powerful AI chips. However, the race is not being run for CPUs (Central Processing Units) but instead for GPUs (Graphics Processing Units).

Such is the craze (and frankly its requirement), that Elon Musk’s xAI is looking to raise capital with the primary goal of purchasing 100,000 GPUs from the industry’s leader NVIDIA.

As per sources familiar with the matter, who spoke to CNBC, xAI is planning to raise up to $6 billion at a valuation of $50 billion in a funding round that should be closed this week.

This large amount is set to consist of a combination of $5 billion from investors from the Middle East, with $1 billion coming from other previous investors.

The new money will be used to buy 100,000 NVIDIA chips, which will be deployed in xAI’s supercomputer in South Memphis, Tennessee, in the United States.

This will help power xAI’s Grok chatbot and Tesla’s full self-driving capabilities.

Interestingly, while Elon Musk’s xAI is looking to “understand the true nature of the universe”, the tech mogul is picking a legal battle with generative AI technology leaders OpenAI. The accusation is that OpenAI is breaching principles it had set when Musk was a part of the company, along with operating a monopoly in the sector that worked to eliminate competitors, including xAI.

One of these principles includes the company’s pivot from operating as a non-profit to a for-profit. Following the announcement of the shift, OpenAI also revealed that it had raised $6.6 billion in a funding round that drove its valuation to $157 billion.

While Musk’s fight was originally restricted to OpenAI, he has now roped in its biggest backer, Microsoft, as well.

Microsoft didn’t provide a comment, however, a spokesperson for OpenAI told BBC the complaint was “baseless”, adding “Elon’s third attempt in less than a year to reframe his claims is even more baseless and overreaching than the previous ones.”

Yet, Musk is pushing forward with heavy investments to bolster xAI with a mega order of NVIDIA AI chips.

On the other hand, NVIDIA is finding itself in a spot of bother, one that will affect its customers.

For months, NVIDIA has touted its highly anticipated next-generation Blackwell chips that are set to revolutionize the GenAI space.

However, these chips are becoming too hot to handle—literally!


As per a report by The Information, NVIDIA is facing challenges in launching its Blackwell chips as they face overheating issues when installed in high-capacity server racks that are designed to house 72 such chips.

These overheating issues have led to further delivery delays, which have come in the form of several rack design changes, in already delayed AI chips, leading to concerns among its customers such as Meta, Google, Microsoft and more.

The main cause for concern is whether these companies will be able to deploy the chips in time.

Speaking to Reuters, an NVIDIA spokesperson said, “Nvidia is working with leading cloud service providers as an integral part of our engineering team and process. The engineering iterations are normal and expected.”

Do you think xAI should consider alternatives or will NVIDIA be able to resolve its AI chip issues in time?

Let us know in the comments below!