Elon Musk’s xAI Ends $10 Billion Server Talks with Oracle

Talks have ended between Elon Musk’s AI startup, xAI, and Oracle Technology. The companies were discussing a potential $10 billion server contract aimed at bolstering xAI’s infrastructure. According to The Information, xAI was already using Oracle’s cloud services to lease Nvidia AI chips. Current Infrastructure and Expansion Ambitions Currently, xAI leases around 16,000 Nvidia GPUs from Oracle, making it a significant customer. Despite the ended discussions, xAI plans to establish “the world’s most powerful supercomputer” in Memphis, Tennessee, which is set to become operational by fall 2025. Musk has also announced plans to deploy a 100,000 H100 liquid-cooled training cluster within the next few months, followed by a 300,000 GPU B200 cluster next summer. Several issues contributed to the break-off. insiders reported that Oracle had already committed the needed capacity to another client. Musk’s stringent timeline requirements also clashed with Oracle’s capabilities. Additionally, concerns regarding the power supply at xAI’s preferred location compounded the difficulties. Alternatives and Ongoing Contracts Even with this deal falling through, xAI continues to utilize Oracle’s Gen2 Cloud for AI model training. Additionally, the startup uses Amazon Web Services and X/Twitter’s excess data center capacity for its operations. Oracle and xAI are reportedly still discussing future infrastructure needs and capacity arrangements. Musk’s vision for xAI is focused on the rapid development and deployment of advanced AI systems. Utilizing Nvidia’s H100 GPUs, the goal is to achieve swift project completions. This approach aligns with Musk’s larger ambitions in the AI sector. New Grok Models Coming This Year Earlier this month, Musk announced that the next generations of the xAI’s Grok language model will arrive this year. Grok 1.5, the latest iteration released in March, featured enhanced reasoning and a context length of 128,000 tokens. Musk said that Grok 2 will launch in August, and Grok 3 will debut by the end of this year.