Oracle Corp (NYSE:ORCL) shares are diving Tuesday afternoon after Elon Musk's xAI ended talks with Oracle regarding a potential server deal.
What To Know: According to a report from The Information, confirmed by Musk, Oracle and xAI have stopped discussions regarding a potential expansion of an existing arrangement in which Musk's AI company would rent specialized NVIDIA Corp (NASDAQ:NVDA) chips from Oracle.
The report, which cites several people involved in the talks, indicates that xAI now plans to buy chips in an effort to build its own data center. Musk confirmed such in a follow-up post on X.
"xAI contracted for 24k H100s from Oracle and Grok 2 trained on those ... xAI is building the 100k H100 system itself for fastest time to completion. Aiming to begin training later this month. It will be the most powerful training cluster in the world by a large margin," Musk said in an X post.
Oracle chairman Larry Ellison said in September that the company was working on a deal to provide cloud infrastructure to xAI to train its AI models. The Information previously reported that the potential $10 billion deal between the two companies would make xAI one of Oracle's largest customers.
On the company's earnings call in December, Ellison used xAI as an example of the enormous demand the company was seeing around AI.
"We got enough Nvidia GPUs for Elon Musk's company, xAI, to bring up the first version — the first available version of their large language model called Grok," Ellison said on the call. "They got that up and running. But boy did they want a lot more, boy did they want a lot more GPUs than we gave them."
Ellison previously described himself as a "close friend" of Musk. He stepped down from Tesla's board in 2022. The move from xAI suggests that business comes first for the Tesla CEO as speed and control are critical factors in the blooming AI revolution.
"The reason we decided to do the 100k H100 and next major system internally was that our fundamental competitiveness depends on being faster than any other AI company. This is the only way to catch up," Musk continued in the X post.
"Oracle is a great company and there is another company that shows promise also involved in that OpenAI GB200 cluster, but, when our fate depends on being the fastest by far, we must have our own hands on the steering wheel, rather than be a backseat driver."
ORCL Price Action: Oracle shares turned sharply lower as soon as The Information report surfaced. The stock was down 2.49% at $141.42 at the time of publication Tuesday afternoon, according to Benzinga Pro.
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