Musk's xAI Abandons $10 Billion Server Deal with Oracle, Vows to Build World's Most Powerful Training Cluster

Musk's xAI Abandons $10 Billion Server Deal with Oracle, Vows to Build World's Most Powerful Training ClusterOn July 10, reports surfaced that billionaire Elon Musk's artificial intelligence startup, xAI, has ended negotiations with Oracle for a $10 billion server agreement. xAI had been renting NVIDIA's AI chips from Oracle and sought to expand the existing deal

Musk's xAI Abandons $10 Billion Server Deal with Oracle, Vows to Build World's Most Powerful Training Cluster

On July 10, reports surfaced that billionaire Elon Musk's artificial intelligence startup, xAI, has ended negotiations with Oracle for a $10 billion server agreement. xAI had been renting NVIDIA's AI chips from Oracle and sought to expand the existing deal. However, the two parties failed to reach an agreement.

Multiple sources familiar with the matter revealed that negotiations for an expanded deal have ceased. On his social media platform, X, Musk stated that xAI is independently building its system using NVIDIA's H100 GPU chips, aiming to "get this done as fast as possible."

Musk further explained the termination of xAI's partnership with Oracle, revealing his plans for a self-built supercomputer: "xAI rented 24,000 H100s from Oracle to train Grok 2. Grok 2 is currently being fine-tuned and debugged, with an expected release next month."

xAI is building a system with 100,000 H100s, aiming to complete it as quickly as possible. The goal is to begin training later this month. This will become the most powerful training cluster in the world.

Musk stated that xAI's decision to build its own supercomputer stems from its reliance on speed as a core competency: "We have to outpace every other AI company. That's the only way to catch up."

He also expressed appreciation for Oracle: "Oracle is a great company. Another company has a similarly promising GB200 cluster. However, given that our future hinges on speed, we have to be at the helm, not in the backseat."

A source revealed that the specific computing power involved in the Oracle-xAI negotiations has been leased to another client. The source stated, "Oracle has been discussing the upcoming availability of computing power with clients and continues to communicate with xAI regarding infrastructure needs."

Reports indicated that xAI and Oracle initially intended to sign a multi-year agreement to lease NVIDIA chips for a supercomputer. However, the speed of the supercomputer that Musk sought to build exceeded what Oracle deemed feasible, leading to negotiation hurdles.

Furthermore, the report added that Oracle also expressed concerns about the insufficient power supply at xAI's preferred location. It should be noted that xAI previously signed a contract with Oracle to utilize its Gen2 Cloud cloud service for AI model training.

The breakdown of negotiations between xAI and Oracle reflects the intense competition in the AI sector and the scramble for computing power among companies. Musk's xAI's decision to build a self-sufficient supercomputer signifies the paramount importance it places on speed and efficiency, as well as its determination to achieve a leading position in the AI field.