Dell expected to sign lucrative billion deal wtih Elon Musk’s xAI, just weeks after HPE’s Colossus win

Dell expected to sign lucrative $5 billion deal wtih Elon Musk’s xAI, just weeks after HPE’s Colossus win

DGIX

February 23, 2025

Dell is close to securing a $5 billion AI server deal with Elon Musk’s xAI
The servers, featuring Nvidia GB200 chips, may support xAI’s supercomputer
Analysts predict Dell’s AI server revenue could hit $14 billion by 2026

We recently reported HPE had beaten Supermicro and Dell Technologies to win a $1 billion contract to supply servers optimized for AI work to Elon Musk’s X, potentially to power Grok, the social network’s AI chatbot.

At the end of 2024, X announced it was rolling out Grok-2 to all users for free, and losing out to HPE would have been a big blow to Dell, which, along with Supermicro, did bid to supply the equipment but was ultimately unsuccessful.

However, if a new report from Bloomberg is accurate, the iconic computer maker could be on the verge of winning an even bigger contract from one of Musk’s other ventures, xAI.

Memphis bound?

The report says that Dell is close to finalizing a deal worth over $5 billion to supply AI-focused servers equipped with Nvidia GB200 chips. Some aspects are still being worked out, sources familiar with the discussions told the news site, but if all goes ahead – and it surely will – the servers are set to be delivered later in 2025.

Elon Musk previously said, “The table stakes for being competitive in AI are at least several billion dollars per year at this point,” and he’s obviously paying to play.

Quite what the servers are for isn’t reported, but it’s very likely that most, if not all of them, will be for xAI’s supercomputer project, known as “Colossus,” which is being built in Memphis using a mix of Dell and Supermicro servers. By all accounts, Dell has been very keen to supply the rest of the servers to finish the job.

This deal with xAI will “firmly establish the company as a leading AI-server provider and boost sales, though the impact on profitability is less clear,” Bloomberg Intelligence analyst Woo Jin Ho noted.

“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,” Bloomberg added, noting Dell is set to to report its fiscal fourth-quarter earnings on February 27.

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