Dell nears deal to sell $5 billion in AI servers to xAI, Bloomberg News reports

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(Reuters) -Dell Technologies is nearing a deal worth more than $5 billion to provide Elon Musk’s xAI with servers optimized for artificial intelligence work, Bloomberg News reported on Friday, citing people familiar with the matter.

Shares of the company gained 4% after the report, which said Dell would sell servers containing Nvidia’s GB200 semiconductors to the AI startup for delivery this year.

Details are still being discussed and may change, the report added.

The AI server maker declined to comment. Representatives for Musk, who owns xAI, did not immediately respond to a Reuters request for comment.

AI servers have been seeing strong demand from enterprises looking for hardware capable of powering complex applications. Musk’s companies, including Tesla and xAI, have emerged as major customers for such hardware.

In December, the Greater Memphis Chamber had said xAI plans to expand its Memphis, Tennessee, supercomputer to house at least one million graphics processing units.

That would represent a massive expansion for the supercomputer called Colossus, which currently has 100,000 GPUs to train xAI’s chatbot called Grok.

As part of the expansion, Nvidia, which supplies the GPUs, and Dell and Super Micro, which have assembled the server racks for the computer, will establish operations in Memphis.

Bloomberg News reported last month that Hewlett Packard Enterprise had struck a deal worth more than $1 billion to provide Musk’s social media platform X with servers optimized for AI work.

(Reporting by Juby Babu in Mexico City; Editing by Shilpi Majumdar)