Elon Musk’s artificial intelligence startup xAI has ended talks with Oracle for a potential $10 billion server deal, according to The Information. The deal would have expanded on an existing arrangement where xAI rents Nvidia’s AI chips from Oracle’s cloud platform.
The talks broke down due to several factors, including Musk’s aggressive timeline for building a supercomputer, concerns about the preferred location’s power supply, and Oracle contracting the specific capacity to another customer.
“Musk’s xAI is building a system using Nvidia’s H100 graphics processing units by itself ‘for fastest time to completion,'” Musk said on his social media platform X.
Sources familiar with the matter told Reuters that the specific capacity Oracle was talking about with xAI has been contracted to another customer.
“The company is always in discussion with customers about upcoming capacity and continues to engage with xAI on its infrastructure needs,” a source told Reuters.
Despite the deal falling through, xAI remains committed to building a supercomputer and is already using Oracle’s Gen2 Cloud to train its AI models under a multi-year contract.
The breakdown of talks highlights the challenges faced by startups seeking to build large-scale AI infrastructure. It also underscores the fierce competition for cutting-edge AI chips and the high demand for cloud computing resources.