Dell, Super Micro Shares Jump on Reports of ‘AI Factory’ for Elon Musk’s xAI

(Bloomberg) -- Dell Technologies Inc. shares rose on Thursday after Chief Executive Officer Michael Dell said the company is building a “Dell AI factory” for Elon Musk’s startup xAI alongside Nvidia Corp.

Most Read from Bloomberg

• Nvidia Rout Takes Breather as Traders Scour Charts for Support

• YouTuber Dr Disrespect Was Allegedly Kicked Off Twitch for Messaging Minor

• BuzzFeed Struggles to Sell Owner of Hit YouTube Show ‘Hot Ones’

• Jain Global Raises $5.3 Billion, Secures Cash From Abu Dhabi

• Israel Court Calls Ultra-Orthodox Men Into Army as Crisis Brews

“We’re building a Dell AI factory with Nvidia to power Grok for xAI,” Michael Dell wrote in an X post on Wednesday.

Musk responded to comments about the post, saying that Super Micro Computer Inc. would also be providing servers. Super Micro’s X account replied to Musk with a celebration emoji and a link to its website.

XAI will use Dell’s XE 9680 servers in the factory, a Dell spokesperson said in an email. “Our size, scale and breadth of solutions position us well for large-scale projects like these,” the company said in a statement, adding that the size of its so-called graphics processing clusters allows it to train AI models faster.

A representative for Super Micro didn’t immediately respond to requests for comment and additional details.

Both Dell and Super Micro are increasing their server capacity to win more business from companies building and working with artificial intelligence programs, which require more data processing power. Super Micro announced earlier this week that it plans to add three new facilities in Silicon Valley to support AI growth. Dell said last month that revenue from its servers equipped to handle AI tasks more than doubled last quarter from the period before and its backlog jumped.

“Dell’s servers are for Elon Musk’s AI startup xAI, and likely to make up half of server volume, with the rest for Super Micro,” said Bloomberg Intelligence analyst Woo Jin Ho. “If the deployment is for Grok 3, which needs 100,000 Nvidia H100 GPUs, the xAI server deal might be worth $3 billion, assuming a price of $1 million per AI-server rack.”

Dell shares rose about 1% to $150.63 at 10:56 a.m. in New York trading after earlier gaining as much as 8.3%. Super Micro rose 8.2% to $995.45 after previously jumping 10%. Nvidia gained 2.5% to $138.94.

Musk launched xAI, an artificial intelligence startup, in July 2023 as an answer to OpenAI and its wildly popular chatbot, ChatGPT. Musk was instrumental to OpenAI’s founding, but withdrew his support and warned of the dangers of AI to humanity. The startup launched its ChatGPT competitor Grok last November and raised $6 billion in venture capital funding in May at a pre-money valuation of $18 billion.

--With assistance from Subrat Patnaik.

(Adds statement from Dell in the fourth paragraph and updates share prices.)

Most Read from Bloomberg Businessweek

• How Jeff Yass Became One of the Most Influential Billionaires in the 2024 Election

• Why BYD’s Wang Chuanfu Could Be China’s Version of Henry Ford

• Corporate Women’s Gains Fall Victim to Anti-Woke Backlash

• Independence Without Accountability: The Fed’s Great Inflation Fail

• How to Do Succession the Right Way

©2024 Bloomberg L.P.