Oracle stock plunges as xAI talks fail

By:
on Jul 9, 2024
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  • Elon Musk posted on X that xAI won't be using Cisco for its 100k H100 system.
  • He wants the company to start training next month.
  • Musk believes the fastest to develop the best tech will win, and for that he needs to take control of things.

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Oracle stock is tanking after talks between the company and Elon Musk’s AI startup xAI failed.

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The two companies were discussing a possible expansion of an arrangement already in place where xAI would rent Nvidia chips from Oracle. The deal was worth $10 billion and would have made xAI one of Oracle’s largest customers. As things stand, that partnership now stands cancelled.

xAI will now build the xAI100k H100 system on its own by buying chips directly from Nvidia. The company aims to start training next month, boasting that its xAI100k H100 system will be the most powerful training cluster ever built.

What went wrong for Oracle?

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In December, Oracle CEO Ellison boasted about how the AI boom was helping the company generate more revenues. In fact, he used xAI as an example on that occasion.

Even back then, Ellison didn’t hesitate from mentioning that Musk demanded way more GPUs than his company gave him.

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.

Oracle CEO Ellison

He was mentioning the fact that the company was able to help xAI with the first version but the demand for more GPUs was clearly an issue even back then.

It is also worth mentioning here that Ellison was on the Tesla board up until 2022. However, his relationship with Tesla and Elon Musk was not enough to save the talks from failing. It also shows that in corporate America, friendships don’t matter.

Elon Musk confirmed this news on X when he said that the partnership could not go forward because the speed of progress was of the utmost importance.

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.

Elon Musk on X

He continued by clarifying he wanted more control over the company’s progress:

…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

Oracle stock has enjoyed a great year so far with YTD returns of over 33%. Elon Musk’s announcement, however, caused the stock to tank over 4%.

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