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The chip is the first in what it describes as a multi-generation compute platform
Nvidia, which last agreed to invest $5 billion in Intel, currently holds the market lead for GPUs used by data centers.
The funding round also saw participation from angel investors.
The decision is part of the US efforts for production of chips locally and reduced its dependence on chip manufacturers in Taiwan.
The funding round also saw "significant investment" from Blackrock, Neuberger Berman, Deutsche Telekom Capital Partners and a large US-based West Coast mutual fund manager.
The new chip, which is tentatively called as B30A, will be single die in nature.
The deal will allow Nvidia to sell its H20 accelerators and AMD its MI308 chips to China.
Prior to this funding round, Groq had raised $640 million in August last year led by Blackrock.
Musk has said that the AI6 chip will be used to power his self driving vehicles and Optimus humanoid robots.
The shortage was due to the cancellation of the manufacturing capacity it had booked at chipmaker Taiwan Semiconductor Manufacturing.
The US government has assured Nvidia that licenses for the H20 AI chips will be granted, and it hopes to start deliveries soon, it said in a blog post.
In a bid to challenge Nvidia’s dominance in the global artificial intelligence hardware space, the company has approached potential customers in UAE, Saudi Arabia, and Thailand.
