According to informed sources, Apollo Global Management LLC, one of Wall Street's major private credit firms, is close to finalizing an agreement to provide approximately $3.4 billion in loans to an investment vehicle. This vehicle will be used to purchase Nvidia chips, which will then be leased to Elon Musk's xAI—a company that recently completed a merger with Space Exploration Technologies Corp. (SpaceX).
This transaction represents Apollo's second significant investment in a vehicle that leases chips to xAI, following a similarly sized $3.5 billion loan provided by the firm last November. The sources indicated that Apollo also plans to make an equity investment in this new vehicle, which aims to raise a total of $5.3 billion in combined equity and debt financing.
The investment, which could be finalized as early as this week, is intended to alleviate some of the financial pressure on xAI. Musk is pursuing an ambitious plan to build the world's largest data center for developing artificial intelligence models. Valor Equity Partners, a long-term investor in Musk's ventures, is leading the arrangement of this transaction.
This investment vehicle is part of a larger financing plan by Valor, which targets raising $20 billion in equity and debt to purchase AI chips and deploy them within xAI's data centers.
Apollo had agreed to the deal before Musk decided to merge xAI with SpaceX, a move that integrates the cash-intensive AI company and social media operations into his core aerospace asset. The newly merged entity is preparing for an initial public offering with a target of raising $50 billion. Following the merger announcement, the price of bonds issued by xAI last year increased, resulting in lower yields.
Financial documents reveal that xAI was burning through more than $1 billion per month in the first nine months of 2025. During this period, the company spent $7.8 billion on property and equipment acquisitions to rapidly construct large-scale data centers and develop its Grok series of AI models.
xAI's primary startup competitors, Anthropic and OpenAI, are also making massive investments in research, development, and computing resources. However, both companies have already achieved annual revenues in the billions of dollars from their AI products. In contrast, Musk's AI company generated revenue of just under $210 million in the first nine months of 2025.
Musk has not faced significant obstacles in raising funds for xAI. Last month, the company announced it secured $20 billion from investors in a separate funding round, exceeding initial expectations by $5 billion. Documents seen by media indicate this is in addition to approximately $19 billion raised cumulatively in prior funding rounds.
Nevertheless, to advance his ambitious plan of building the world's largest AI data center, Musk is increasingly reliant on debt markets and his most loyal investors. Last summer, he tasked Morgan Stanley with raising about $5 billion in debt financing with a 12.5% interest rate.
Valor has a history of supporting multiple companies under Musk's umbrella. According to its website, its Chief Executive Officer, Antonio Gracias, currently serves on the board of SpaceX and describes himself as a close friend of Musk. In 2008, Valor led a $40 million bridge loan to help Musk's electric vehicle company, Tesla, navigate a critical period.
In the past, Valor partners, including Gracias, have stepped in to provide expert support to Musk's companies during pivotal times, such as during Tesla's production crisis and following Musk's restructuring of X.
Apollo, which manages assets exceeding $900 billion, is increasing its financing activities in the AI chip and data center sectors. The firm acquired Stream Data Centers, located in Texas, last year and is exploring investments in computing infrastructure for major technology companies through its life insurance business unit.
Apollo often provides support to companies facing financing challenges, typically demanding high returns and strict loss protection terms. Christopher Lahoud, an Apollo partner who led the rescue and restructuring of rental car company Hertz during its bankruptcy in 2021, is overseeing this investment in xAI.
According to the sources, the debt financing Apollo is providing to the investment vehicle is expected to carry an interest rate of 9.5%. Apollo also plans to sell portions of the debt to other institutions and assist the vehicle with its equity fundraising efforts. A spokesperson for Apollo declined to comment.
In its pitch to equity investors, Valor projected that if the investment vehicle can sell the chips and data center equipment for a quarter of their purchase price after five years—a scenario it labels the "base case"—investors could achieve an annualized return exceeding 22%.
Documents show that in a "downside scenario," where the vehicle can only sell the chips to refiners for their value as raw materials like gold and copper, investors could still see an annualized return of nearly 17%. A similar return would be achievable if xAI renews the lease for three years at a 40% to 70% discount.