Dell, Super Micro Shares Jump on Reports of 'AI Factory' for Elon Musk's XAI

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(Bloomberg) — Shares of Dell Technologies Inc. rose Thursday after Chief Executive Officer Michael Dell said the company is building a “Dell AI factory” with Nvidia Corp for Elon Musk's startup xAI.

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“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 Microcomputer Inc. will also provide servers. Supermicro's X account responded to Musk with a celebratory emoji and a link to his website.

XAI will use Dell's XE 9680 servers at the factory, a Dell spokesperson said in an email. “Our size, scale and breadth of solutions make us well-positioned for such large-scale projects,” the company said in a statement, adding that the size of its so-called graphics processing clusters allows it to run AI models. Allows for faster training.

A representative for Super Micro did not immediately respond to requests for comment and additional details.

Both Dell and SuperMicro are increasing their server capacity to win more business from companies building and operating artificial intelligence programs, which require more data processing power. Supermicro announced earlier this week that it plans to add three new facilities to support AI development in Silicon Valley. Dell said last month that revenue from its servers equipped to handle AI tasks had doubled from the year-earlier period last quarter and its backlog had grown.

“Dell's servers are for Elon Musk's AI startup xAI, and could potentially make up half of the server volume, with the rest for Super Micro,” said Woo Jin-ho, an analyst at Bloomberg Intelligence. “If the deployment is for Grok 3, which requires 100,000 Nvidia H100 GPUs, the xAI server deal could be worth $3 billion, at $1 million per AI-server rack.”

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

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

– With help from Subrata Patnaik.

(Adds deal statement in fourth paragraph and updates share prices.)

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