Dell Technologies is nearing a substantial agreement worth over $5 billion to supply servers optimized for artificial intelligence (AI) workloads to Elon Musk’s AI venture, xAI. Sources familiar with the deal revealed that the servers, equipped with Nvidia’s powerful GB200 semiconductors, are expected to be delivered later this year.
This move comes amid surging demand for high-performance computing to power AI applications, a market where Dell, along with competitors like Super Micro Computer and Hewlett Packard Enterprise, has seen significant growth. Musk’s companies, particularly Tesla and xAI, have become key customers for these advanced servers, which are crucial to supporting AI-driven technologies.
Although Dell and Nvidia declined to comment on the matter, and xAI did not respond to inquiries, industry observers have pointed out the importance of this deal for Dell’s positioning as a dominant player in the AI server market. In fact, Dell’s stock rose by as much as 6% to $116.88 on February 14 following the news, signaling investor optimism.
xAI, Musk’s AI startup, has been building a supercomputer in Memphis, combining Dell and Super Micro servers. In December 2023, Dell disclosed that it had deployed tens of thousands of graphics processing units (GPUs)—the essential chips powering AI functions—at the site and was working to capture a larger share of the project’s remaining expansion. Nvidia, known for its industry-leading GPUs, plays a key role in supplying the hardware necessary for AI infrastructure.
Analysts predict that Dell will surpass $10 billion in AI server shipments for the fiscal year that ended last month, with projections indicating that figure could rise to $14 billion by fiscal 2026. The company’s AI server division is expected to be a major focal point when Dell reports its fourth-quarter earnings on February 27, with investors keen to gauge its impact on future growth.
For xAI, this collaboration will be instrumental in scaling its capabilities, especially as its flagship product, the chatbot Grok, is integrated into the platform X (formerly Twitter). While the deal strengthens Dell’s position as a key AI infrastructure provider, analysts note that its effects on profitability remain uncertain.
This agreement underscores the increasing intersection of AI technology and the hardware industry, with Musk’s companies heavily investing in the computing power required to support their ambitious AI ventures.
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