This will be the latest “group heating” collaboration between Musk and “close friend” and Oracle co-founder Ellison in the field of AI. Some speculate that the size of the $10 billion cloud agreement means that xAI will need to raise more capital in the future to pay for cloud costs. Oracle's stock price skyrocketed by more than 5%, the biggest intraday increase in two months.
On Tuesday, May 14, some media quoted people familiar with the matter involved in the negotiations as saying that Musk's artificial intelligence startup xAI, founded in July last year, is close to reaching an agreement to rent Oracle's AI servers for 10 billion US dollars for many years.
The report said the deal would make xAI one of Oracle's biggest customers. The $10 billion deal is also similar to the scale reached by XAI competitors such as OpenAI and Anthropic and Oracle's cloud business rivals such as Microsoft, Amazon, and Google.
This will also be Musk's latest collaboration with his “close friend” Larry Ellison (Larry Ellison), co-founder of Oracle.
Two months ago, it was reported that Musk's space exploration and transportation company SpaceX is collaborating with Oracle to help US farms use artificial intelligence tools to plan and predict agricultural production.
However, Ellison has stated many times that he is a “very close friend” with Musk. He served as a director of Tesla from 2018 to 2022, and also funded Musk's acquisition of the social network Twitter.
Meanwhile, xAI is trying to complete a round of equity financing of 3 billion to 6 billion US dollars. Related reports appeared a few weeks ago. Some media predicted that the details of the financing round would be released last week. Allegedly, after successful financing, xAI's valuation was close to 18 billion US dollars.
According to some analysts, it is unclear whether Oracle will take the opportunity of AI server cooperation to invest in xAI in the latest equity financing. Earlier news said that Sequoia Capital will participate in the financing.
Most of the funding round is likely to be used to accelerate the leasing of AI chips to improve XAI's generative AI chatbot Grok. Therefore, some speculate that the size of the $10 billion cloud agreement means that xAI will need to raise more capital in the future to pay for cloud costs.
According to an insider who recently participated in xAI's potential financing negotiations, Musk hinted that he was “one of the few executives who can raise enough capital to compete with other leading AI companies.”
Musk said last month that xAI would require 100,000 Nvidia H100 GPU chips to train the Grok 3.0 model, and is currently using around 20,000 H100 chips to train the 2.0 version. According to reports, Musk hopes to reach the target of 100,000 GPUs in the second half of 2025.
Currently, by investing in OpenAI, Microsoft has been able to rent its own AI servers equipped with high-end chips, and Amazon and Google also use the same business logic to cooperate with artificial intelligence startup Anthropic.
Oracle has become the GPU supplier of choice for smaller AI startups, which sometimes struggle to obtain enough GPUs. According to other analysts, Oracle was one of the first suppliers to use Nvidia's newest and most powerful Blackwell server chips.
Ellison revealed in March that 40 companies have committed more than $1 billion to Oracle Cloud, mainly to access GPU servers. Another person with direct knowledge revealed that xAI is already Oracle's largest H100 customer, using more than 15,000 chips.
However, Musk's xAI and Ellison's Oracle are still struggling to catch up with their respective rivals in the AI field. The appeal of the collaboration between the two is that Oracle does not do business with OpenAI (which Musk can't see) and Anthropic as a cloud vendor.
Not only is Oracle Cloud's GPU capacity significantly lower than Amazon AWS and Microsoft Azure, Musk's vision for XAI to use 100,000 H100 by the end of next year is also less than Meta's plan to deploy 350,000 H100 chips by the end of this year. Furthermore, Microsoft hopes to provide OpenAI with servers that can accommodate hundreds of thousands of GPUs this year and next, and the two are also discussing the development of a supercomputer worth 100 billion US dollars.
Oracle's stock price skyrocketed in midday trading on Tuesday, reaching a high of 5.3%, the biggest intraday increase in at least two months since March 12, and the stock price rebounded to a one-month high. Some netizens called it another demonstration of “Musk Magic” (Musk Magic).
