Elon Musk’s xAI and Oracle End Talks on $10 Billion Server Deal

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Key Points:

  • Talks between Elon Musk’s xAI and Oracle on a $10 billion server deal have ended.
  • xAI has been renting Nvidia’s AI chips from Oracle’s cloud services under an existing arrangement.
  • Musk announced that xAI will proceed independently using Nvidia’s H100 GPUs for “fastest time to completion.”
  • Negotiations stalled due to Musk’s ambitious demands and concerns about power supply at the preferred location.

According to a report by The Information on Tuesday, Billionaire Elon Musk’s artificial intelligence startup xAI and tech giant Oracle have ended discussions on a potential $10 billion server deal. The two companies had been in talks to expand an agreement in which xAI rents Nvidia’s AI chips from Oracle’s cloud services.

The breakdown in talks marks a significant shift for xAI, which has been utilizing Nvidia’s H100 graphics processing units (GPUs) through Oracle to build its AI systems. Musk announced on his social media platform, X, that xAI would now proceed independently to complete the project using Nvidia’s H100 GPUs for “the fastest time to completion.”

“The company is always in discussion with customers about upcoming capacity and continues to engage with xAI on its infrastructure needs,” a source familiar with the matter stated.

The multi-year agreement to rent Nvidia processors from Oracle for a planned supercomputer had been under negotiation. However, the discussions encountered several obstacles, including Musk’s ambitious demands for building a supercomputer faster than Oracle deemed feasible, according to The Information. Additionally, Oracle raised concerns about the adequacy of the power supply at xAI’s preferred location for the supercomputer.

Despite the end of this particular deal, xAI still maintains a contract to train its AI models using Oracle’s Gen2 Cloud. This ongoing relationship indicates that while the large-scale server deal has fallen through, the collaboration between the two companies has not been entirely severed.

The collapse of the $10 billion server deal highlights the challenges in aligning the ambitious goals of Musk’s xAI with the logistical and technical capabilities of Oracle. The differences in expectations and feasibility assessments ultimately led to the termination of the negotiations.

Oracle, known for its robust cloud infrastructure, has provided services to various enterprises, including AI startups like xAI. The company’s hesitation regarding the power supply and Musk’s ambitious timeline underscores the complexities of such large-scale tech agreements.

As xAI moves forward independently, the startup must address the technical and logistical hurdles of building and deploying advanced AI systems. The decision to proceed without Oracle’s expanded support will test xAI’s ability to meet its ambitious goals and timelines in the competitive field of artificial intelligence.

TechGolly editorial team led by Al Mahmud Al Mamun. He worked as an Editor-in-Chief at a world-leading professional research Magazine. Rasel Hossain and Enamul Kabir are supporting as Managing Editor. Our team is intercorporate with technologists, researchers, and technology writers. We have substantial knowledge and background in Information Technology (IT), Artificial Intelligence (AI), and Embedded Technology.

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