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(Bloomberg) -- Dell Technologies Inc. is in advanced stages of securing a deal worth more than $5 billion to provide Elon Musk’s xAI with servers optimized for artificial intelligence work.
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The company will sell servers containing Nvidia Corp. GB200 semiconductors to Musk’s AI startup for delivery this year, according to people familiar with the matter, who asked to not to be named because the work is private. Some details are being finalized and still may change, some of the people added.
Demand for computing to run AI workloads has led to a boom for makers of high-powered servers like Dell, Super Micro Computer Inc. and Hewlett Packard Enterprise Co. Musk’s companies, including carmaker Tesla Inc. and xAI, have emerged as major customers for the hardware.
Dell and Nvidia declined to comment. xAI didn’t respond to a request for comment.
Dell shares jumped as much as 6% to $116.88 Friday on the news before paring some gains. The stock had slipped 4.3% this year through Thursday’s close.
A supercomputer project being built by xAI in Memphis has used a mix of Dell and Super Micro servers. In December, Dell said it had deployed tens of thousands of graphics processing units, or GPUs, there and was working to win an “unfair share” of the remaining build-out. GPUs are the key chips to power AI workloads and Nvidia is the top maker of those processing units.
Analysts expect Dell will have shipped more than $10 billion of AI servers in the fiscal year ending last month and project that value will jump to $14 billion in the fiscal year ending in January 2026. Dell is scheduled to report fiscal fourth-quarter earnings on Feb. 27, with the AI server business a major focus for investors.
The deal with xAI “would firmly establish the company as a leading AI-server provider and boost sales, though the impact on profitability is less clear,” wrote Woo Jin Ho, an analyst at Bloomberg Intelligence.
AI startup xAI’s main product, a chatbot called Grok, has primarily been available to paying users of X, the social network formerly known as Twitter. Firms that Musk runs are known to share employees, technology and computing power.
--With assistance from Ian King and Kurt Wagner.
(Updates with comments from analyst in the eighth paragraph.)
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