Dell and Super Micro Shares Surge on 'AI Factory' Reports for Musk's xAI

Dell Technologies and Nvidia Partner to Build AI Factory for Elon Musk’s Startup

Dell Technologies Inc. shares surged on Thursday following an announcement from CEO Michael Dell that the company is constructing a "Dell AI factory," in collaboration with Nvidia Corp., to support Elon Musk's new venture, xAI. "We’re building a Dell AI factory with Nvidia to power Grok for xAI," Michael Dell disclosed in a social media post on Wednesday. Musk acknowledged the development, highlighting that Super Micro Computer Inc. would also be providing servers for the project. Super Micro's social media account responded with a celebratory emoji and a link to its website.

Expansion of Server Capacity

Both Dell and Super Micro are ramping up their server capabilities to cater to the growing demand from companies developing and utilizing artificial intelligence programs, which necessitate increased data processing power. Super Micro recently disclosed plans to inaugurate three new facilities in Silicon Valley to foster AI expansion. Dell, on the other hand, reported last month that revenue from its AI-optimized servers more than doubled from the previous quarter, with a significant increase in backlog.

Analyst Insights

"Dell’s servers are designated for Elon Musk’s AI startup xAI and are expected to constitute half of the server volume, with the remainder supplied by Super Micro," stated 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 valued at around $3 billion, assuming a cost of $1 million per AI-server rack."

Impact on Share Prices

The announcement positively impacted the stock market, with Dell shares climbing by 5% as of 9:51 a.m. in New York. Additionally, Super Micro's shares increased by 9%, while Nvidia saw a 3% uptick in its stock value.

Background on xAI

Elon Musk launched xAI, an artificial intelligence startup, in July 2023, positioning it as a rival to OpenAI and its immensely popular AI chatbot, ChatGPT. Although Musk was crucial to the inception of OpenAI, he later withdrew his support, expressing concerns about AI’s potential threats to humanity. xAI debuted its ChatGPT challenger, Grok, last November and secured $6 billion in venture capital funding in May, achieving a pre-money valuation of $18 billion.