Elon Musk’s artificial intelligence (AI) startup xAI which released the latest iteration of its Grok chatbot on Tuesday, is nearing a $5 billion server deal with Dell Inc.
Under the deal, Dell would supply xAI with servers powered by NVIDIA Corp.’s GB200 semiconductors which are in significant demand for AI workloads.
Some elements of the deal, first reported by Bloomberg News, are being ironed out and could be changed.
“This is a smart deal that would accelerate Dell’s position as a leader in highly competitive AI infrastructure hardware, inference and GPU compute market,” Mitch Ashley, vice president and practice lead, DevOps and Application Development, The Futurum Group, said in a message. “Dell advantages xAI as a partner who can scale to meet the demands of this rapidly changing AI model, data and application space.”
“XAI and Dell would be wise to tailor offerings to the software development and platform engineering teams in organizations, two keys to rapidly getting the next generation of AI applications into production,” Ashley added.
Bloomberg analyst Woo Jin Ho said the deal “would firmly establish [Dell] as a leading AI-server provider and boost sales, though the impact on profitability is less clear.”
Dell shipped more than $10 billion in AI servers in the fiscal year that ended in January, analysts estimate, with projections to reach $14 billion by January 2026.
Dell and xAI are no strangers. The Musk startup’s supercomputer project in Memphis, Tennessee, has used Dell and Supermicro Computer Inc. servers. In fact, Dell said in December it had incorporated tens of thousands of GPUs in Memphis and intended to secure a significant portion of the remaining build-out, according to Bloomberg.
The growing Dell-xAI tandem highlights the ever-increasing stakes in the race to lead the burgeoning AI market, a space that is now led by OpenAI, Microsoft Corp., Google, Facebook parent Meta Platforms Inc., and Amazon.com Inc.
The emergence of xAI, founded by Musk in 2023, adds a new dimension. On Tuesday, it released Grok-3, which features synthetic datasets and self-correction for improved accuracy. It was build using the Colossus supercomputer and 100,000 NVIDIA GPU hours, according to xAI.
In a livestreamed presentation late Monday, Musk claimed Grok-3 outperforms models from OpenAI, Anthropic, DeepSeek, and Google in performing math, science and coding benchmarks. The results were not independently verified, though.
