In what feels like the tech world's most exclusive poker game, Nvidia is reportedly ante-ing up in Elon Musk's artificial intelligence venture, xAI. The GPU powerhouse is expected to join a jaw-dropping $20 billion funding round that would value Musk's AI startup at a figure that makes financial analysts reach for their calculators—and possibly a stiff drink.
Let's be clear about what we're witnessing here: a company with barely more than a name and a chatbot in limited release is potentially worth $18 billion more than most companies with, you know, actual products.
I've covered tech valuations since the frothy days of 2016, and even by Silicon Valley's elastic standards, this stretches credibility. It's what I've started calling "proximity valuation"—where worth is determined less by balance sheets and more by who's standing in the room.
The Nvidia-Musk partnership makes a certain circular kind of sense, though. Nvidia makes the chips that power AI systems. Musk needs those chips for xAI. Nvidia investing in xAI is essentially betting on a customer who will... buy more Nvidia products. It's brilliant in its simplicity, like a dairy farmer buying shares in an ice cream shop.
"This is basically Nvidia ensuring they have a seat at every AI table," a venture capitalist (who asked not to be named because they weren't authorized to speak about deals they weren't involved in) told me last week. "They don't care who wins as long as everyone's playing their game."
What's particularly fascinating—and somewhat bizarre—about this AI ecosystem is how incestuous it's becoming. Musk co-founded OpenAI before his dramatic departure, and now builds xAI as a self-described "maximum truth-seeking" alternative while publicly criticizing his former creation. Meanwhile, Nvidia supplies chips to virtually everyone who matters in AI: OpenAI, Anthropic, Meta, and now its own investment target.
The chip maker has effectively positioned itself as Switzerland in the AI wars. Except this Switzerland is heavily armed and selling to all sides.
This $20 billion round (if it closes as reported) would represent one of the largest private funding rounds for a company with minimal public product presence. xAI's chatbot, Grok, remains in limited release, though Musk promises it'll eventually grace the screens of premium subscribers on his social media platform X.
I spoke with several AI researchers who questioned whether xAI brings anything fundamentally different to the table beyond its famous founder. Musk has positioned the company as developing "AI that is maximally curious and truth-seeking," but how that translates to practical differentiation from other large language models remains... well, theoretical at best.
For Nvidia, which has ridden the AI wave to a market value north of $2 trillion, this investment is pocket change that could yield outsized benefits. By backing Musk's AI venture, Nvidia gains insight into one of the more enigmatic approaches to artificial general intelligence while potentially securing a long-term customer relationship.
Look, we've seen this movie before—capital flowing toward companies adjacent to the perceived next big thing, often with scant regard for traditional metrics like revenue or profit. During the dot-com boom, it was enough to add ".com" to your company name. Now, apparently, you just need to add "AI" and have Elon's phone number.
The Saudi Arabian sovereign wealth fund is reportedly also circling this funding round, which would add another layer of financial and geopolitical intrigue to an already complex picture.
What strikes me most about this entire arrangement is how it reflects the increasingly concentrated nature of AI development. We're watching a scenario where the same small group of companies and billionaires circulate capital, talent, and technology amongst themselves—creating an AI development ecosystem that resembles nothing so much as a members-only club with a trillion-dollar entrance fee.
In the meantime, Nvidia continues its strategy of being the ultimate arms dealer in the AI race—selling picks and shovels during the gold rush while also selectively buying mining claims. It's worked spectacularly well so far, with the company's stock up approximately 250% over the past year.
And in the strange new world of AI investments, $20 billion no longer seems absurd—just another day in an industry where the normal rules of financial gravity have been temporarily suspended.
Now we wait to see if xAI can deliver something that justifies its astronomical valuation, or if this is just another example of the "Musk Multiple" at work.
