Apollo is in talks to lead an approximate $12bn private debt financing to support artificial intelligence firm xAI’s expansion plans, according to 9fin sources.

The potential deal being discussed would include around $10bn of private loans and an approximate $2bn revolver, sources said. Other private credit firms are also engaged with the company on the debt package, sources noted.

A deal is not yet finalized and there is still room for banks to participate, a source close added.

The Elon Musk-backed AI startup is working with Valor Equity Partners to talk to lenders for the debt raise, the Wall Street Journal first reported.

The funds would be used to buy Nvidia chips that would be leased to xAI for new data centers to power the company’s AI chatbot, Grok, according to the report.

In the hyper-competitive AI arms race, Musk is tapping whatever pools of capital he can access. In July, one of his other companies, SpaceX, invested $2bn into the startup.

In June, the company completed a $5bn debt raise after the lead banker Morgan Stanley sweetened terms to get the deal over the line, as 9fin reported.

However, the company is expected to spend the cash quickly. The above WSJ report states that projections shared with potential creditors earlier this year show xAI is expected to burn $13bn of cash in 2025.

Huge private credit deals to fuel the AI arms race are fast becoming the story of the summer. Last week, Meta picked Pimco and Blue Owl to lead a $29bn financing for its data center expansion in Louisiana, Bloomberg reported.

Pimco is expected to provide $26bn of investment-grade bonds backed by the data center’s assets, while Blue Owl is pitching in $3bn of equity, the report states.

Apollo and KKR were also vying to lead that deal, ran by Morgan Stanley, up until the final round of talks, per the report.

Apollo, xAI, and Valor Equity Partners did not respond to requests for comment.