In a significant move within the tech industry, Oracle is reportedly in discussions to secure a massive $10 billion contract with Elon Musk’s artificial intelligence startup, xAI, to lease cloud servers from Oracle, according to a source familiar with the negotiations. This deal, as reported by The Information, would establish xAI as one of the largest clients of Oracle, signifying a robust entry for Musk into the competitive AI market space.

The discussions, which have not yet concluded, could see xAI committing to Oracle’s cloud services over several years, highlighting the AI startup’s ambitious agenda to scale its operations and technological capabilities significantly. The strategic relationship would potentially support xAI in its goal to develop and enhance AI solutions that could rival those of established players like OpenAI and Google.

With its strong cloud infrastructure and technological capabilities, Oracle may be able to provide xAI with the backend power needed to train complex AI models. In September of last year, Oracle co-founder Larry Ellison – who has identified as a personal friend of Elon Musk – announced that xAI had already inked a deal to use Oracle’s Gen2 Cloud for AI model training, underscoring the strengthening relationship between the two companies.

NVIDIA H100 AI chips

Additionally, Oracle’s recent updates to its database technology, aimed at better integration with AI applications, would suggest a timely and strategic enhancement that would benefit xAI. This is particularly relevant as xAI is already a significant client of Oracle’s resources, being the largest user of the H100 AI chips at Oracle, produced by NVIDIA, with over 15,000 units in use.

Moreover, Musk’s integration of AI technology into his broader business ecosystem was apparent last month when he announced the upcoming launch of an advanced version of xAI’s chatbot, Grok. This tool is set to be available to early testers and existing users on Musk’s social media platform, X, promising to deliver enhanced digital interactions.

We will be keeping a close eye on the talks, but it’s still unclear if this big deal will ever happen. The current negotiations between Oracle and Musk’s representatives have not yet been addressed, which has led to conjecture and expectation regarding the possible ramifications of this alliance on the AI scene.