(Bloomberg) — Dell Technologies Inc. shares rose on Thursday after Chief Executive Officer Michael Dell said the company is working with Nvidia Corp. to build a “Dell AI factory” 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 Micro Computer Inc. would also provide servers. Super Micro's X account responded to Musk with a celebratory emoji and a link to its 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 large projects like this,” the company said in a statement, adding that the size of its so-called graphics processing clusters allows it to train AI models quickly.
Representatives for Super Micro did not immediately respond to requests for comment and additional details.
Both Dell and Super Micro are expanding their server capacity to win more business from companies building and working on 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 development. Dell said last month that revenue from its servers equipped to handle AI tasks more than doubled from the previous quarter and its backlog also grew.
“Dell's servers are for Elon Musk's AI startup xAI, and are likely to make up half of the server volume, while the rest is for Super Micro,” said Bloomberg Intelligence analyst Woo Jin Ho. “If the deployment is for Grok 3, which requires 100,000 Nvidia H100 GPUs, the xAI server deal could 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 earlier gaining as much as 10%. Nvidia rose 2.5% to $138.94.
Musk launched xAI, an artificial intelligence startup, in July 2023 as an answer to OpenAI and its hugely popular chatbot, ChatGPT. Musk was instrumental in founding OpenAI, but withdrew his support and warned about 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 Dell statement in fourth paragraph and updates share price.)
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