PE giant Apollo provides $3 billion in financing to purchase NVIDIA chips for lease to xAI

Apollo Global Management is extending its private credit reach into AI computing assets through structured financing that involves “buying chips and leasing them out,” providing cash flow buffers for high-capital expenditure projects like xAI, and opening a hardware-backed income stream for investors.

According to The Information, citing sources familiar with the matter, Apollo is close to securing a approximately $3.4 billion loan arrangement, which will be invested in an investment vehicle that plans to purchase Nvidia chips and lease them to Elon Musk’s xAI, with the deal potentially closing as soon as this week.

This will be Apollo’s second major support for a chip leasing vehicle targeting xAI. Previously, in November last year, Apollo provided a similar $3.5 billion loan. Sources say Apollo also plans to invest equity in the new vehicle, which aims to raise about $5.3 billion in combined equity and debt funding.

Valor Equity Partners is orchestrating the transaction. This chip leasing vehicle is part of a larger financing effort by Valor, which plans to raise $20 billion in debt and equity to fund AI chips installed in xAI data centers.

xAI’s monthly cash burn exceeds $1 billion, with heavy asset expansion driving increased financing needs

The Information, citing financial documents, states that in the first nine months of 2025, xAI spent $7.8 billion on real estate and equipment to build large data centers for its Grok series models.

By fall 2025, xAI’s monthly cash burn exceeds $1 billion. During the same period, xAI recorded nearly $210 million in revenue.

Against this backdrop, purchasing chips via a vehicle and leasing them out allows converting some one-time capital expenditures into ongoing leasing costs, alleviating short-term cash flow pressures.

Musk has not faced significant hurdles in raising funds for xAI. The Information reports that last month, the company announced it had raised $20 billion in a separate funding round, exceeding initial expectations by $5 billion.

Sources say that Apollo’s approval for this transaction occurred before Musk decided to merge xAI with SpaceX.

Return assumptions: Base case annualized return exceeds 22%, downside scenario around 17%

The debt provided by Apollo for this investment vehicle is expected to carry a 9.5% interest rate. Sources reveal that Apollo also plans to sell some of the debt to other institutions and assist in selling equity in the vehicle.

In investor presentations, Valor forecasts that if the vehicle can sell chips and data center equipment at a quarter of their purchase price—described as the “base case”—investors could achieve over a 22% annual return.

Even in a “downside scenario,” investors could still realize nearly a 17% annual return. This scenario assumes the chips are sold at raw material value (including gold and copper) to refineries. If xAI renews leases at 40% to 30% discounts for three more years, investors could still see similar returns.

Apollo’s strategy: Accelerating AI chip and data center financing

With assets under management exceeding $900 billion, Apollo is rapidly expanding its financing for AI chips and data centers. Last year, Apollo acquired Stream Data Centers in Texas and is exploring using its insurance business funds to invest in computing infrastructure for large tech firms.

The Information also notes that Apollo often intervenes when corporate cash raising is difficult, typically demanding high returns and setting strict risk protection clauses. The current chip leasing vehicle related to xAI continues its private credit strategy of risk-based pricing for higher yields.

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