Dell Tech x.AI Ai Deal

The Six Five team discusses Dell Tech x.AI Ai deal.

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Transcript:

Daniel Newman: Michael Dell, put out a tweet that got like 700 million views, but it did, it got a lot. And he basically announced that they are partnering with xAI on this mega mega deal, Pat.

Patrick Moorhead: Yeah, it took a while to piece it together, but I do love this new way of getting information out because most of the data or the information came out from X, Elon responding to people’s tweets. And Michael, with this initial tweet, here’s what I think we’ve been able to piece together. Dell’s responsible for half of those racks. I don’t think Supermicro has confirmed it or denied it, but it looks like it’s them. And obviously NVIDIA for the GPUs. Now there is this notion that this will be the largest GPU cluster in existence. I think a hundred thousand GPUs. I thought there were ones that were as large as that, but maybe that’s not true.

And as we’ve heard from Broadcom and NVIDIA and Marvell, they’re talking about a million GPU or a million ASIC or accelerator cluster. So financially, and sometimes people are just making this up, but it passes my smell test, about a million bucks per AI server rack with a hundred thousand NVIDIA GPUs, around $3 billion, supposed to be online, going to take a long time. Operational by fall of 2025? I don’t know. I don’t know if that’s accurate or not. Why would you be shipping racks? I don’t think it takes, unlike high performance computing in a national labs, I don’t think you’re dealing with proprietary stuff like a slingshot interconnect that you have figured out. But net-net, congratulations to Dell. Congratulations, Michael. You guys are crushing it. One thing I did want to point out is that the xAI deal was reflected in Dell’s AI server backlog reported in Q1. This wasn’t some slip that the company made getting this out there. So great job.

Daniel Newman: Yeah, so our friend Ed Ludlow from Bloomberg shared something from the Bloomberg intelligence team that I think is worth noting. They modeled the Dell Super Micro xAI deal for what it could be worth. And so he shared it, but he basically said if the deal for Grok 3, they asked that there’s a hundred thousand H100 requirement per the comments Musk made, right? Assuming you priced each server rack at a million a piece, total value of the deal would be about 3 billion. So a billion and a half to Dell, billion and a half to TSMC, 36 GPU per rack. 2,700 racks, 2.7 billion. So that was the numbers Bloomberg Intelligence came up with in a short, it was in a tweet. I’ll try to drop it in the show notes, but we’ll have to do our own modeling, Pat. But look, a huge win. Just what a huge, huge, huge win.

And this by the way, is why the OEMs are going all in with NVIDIA. This is the deal that only NVIDIA can get and they’re able to be, again, they all have to add their own value, but they’re being carried along by this. This is a absolute tailwind for so many different companies and the amount of demand it’s creating is basically making at least that first wave within the first orbit of NVIDIA. Those companies are benefiting. None are making profits like NVIDIA, but they are benefiting from a revenue standpoint and from, by the way, it’s not just about revenue here, Pat, when you actually are in an inflection in a market like we’re in right now, it’s also about relevancy into the next era. These companies cannot create a perception like they’re being left behind. And so they have to be seen as relevant here. And so Pat, great analysis on your end.