NIX Solutions: xAI to Spend $10 B on Oracle Cloud Servers

Elon Musk’s AI startup xAI is gearing up to invest $10 billion in servers hosted in the Oracle cloud. According to sources cited by The Information, both companies are negotiating a long-term cooperation agreement, which would position xAI as one of Oracle’s largest clients.

NIX Solutions

Competing in the AI Landscape

xAI’s need for substantial computing resources is driven by its ambition to compete with industry giants like OpenAI and Anthropic. These competitors have already secured multibillion-dollar investment deals with Microsoft and AWS, granting them access to extensive cloud infrastructure for training and running large language models (LLMs). For instance, Microsoft and OpenAI are rumored to be preparing to spend $100 billion on a 5 GW Stargate data center campus. Currently, Microsoft rents some of its AI accelerators from Oracle.

Last year, xAI introduced its Grok chatbot, available to paid users of the social network X. Now, a second version is under development. Reports indicate that xAI is nearing the completion of a $6 billion investment round, with Musk confirming that the funds will be allocated towards renting infrastructure. In a recent statement, Musk mentioned that the current product is trained on 20,000 NVIDIA accelerators, but Grok 3.0 will require 100,000 accelerators.

Strategic Partnerships and Resource Expansion

The collaboration between Musk and Oracle founder Larry Ellison is notable, given their close friendship and Ellison’s former position on Tesla’s board of directors. In December, Ellison stated that xAI was already Oracle’s largest customer and claimed the cloud giant had sufficient accelerators for the first-generation Grok. However, he acknowledged that xAI’s demands are growing. Presently, xAI rents 15,000 NVIDIA H100 accelerators from Oracle, while Tesla, another of Musk’s ventures, has AI resources equivalent to 35,000 H100s in operation.

AI infrastructure has become a significant revenue source for cloud operators, notes NIX Solutions. In March, Ellison revealed that Oracle is building new data centers, including what he described as the “world’s largest” facility. This expansion is noteworthy given Musk’s previous cost-cutting measures following his acquisition of Twitter (now X), where his management team sought to reduce expenses by avoiding services from Oracle, AWS, and Google.

We’ll keep you updated as more information becomes available about this significant investment and its implications for the AI and cloud computing industries.