Dell and Super Micro shares jump on reports of Elon Musk's xAI 'AI Factory'

(Bloomberg) – Dell Technologies. Shares rose Thursday after CEO Michael Dell said the company is building a “Dell AI factory” for Elon Musk’s xAI startup alongside Nvidia Corp.

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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 Super Micro Computer Inc. Servers will also be provided. Super Micro’s X account responded to Musk with a celebratory emoji and a link to his website.

XAI will use Dell XE 9680 servers at the plant, a Dell spokesman said in an email. “The size, scale and breadth of our solutions positions us well for large-scale 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 faster.

A Super Micro representative did not 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 that build and run AI software, which requires more data processing power. Super Micro announced earlier this week that it plans to add three new facilities in Silicon Valley to support the growth of artificial intelligence. Dell said last month that revenue from its servers equipped to handle AI tasks doubled in the latest quarter from the previous period and its backlog jumped.

“Dell’s servers are dedicated to Elon Musk’s AI startup XAI, and will likely make up half of the server volume, with the rest to Super Micro,” said Woo Jin Ho, a Bloomberg Intelligence analyst. “If the deployment is for Grok 3, which needs 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 gains of as much as 8.3%. Super Micro stock rose 8.2% to $995.45 after previously jumping 10%. Nvidia shares rose 2.5% to $138.94.

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 Musk was instrumental in founding OpenAI, but has withdrawn his support and warned of the dangers of AI to humanity.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

– With the help of Subrat Patnaik.

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