Reasons Why xAI Oracle Deal Got Cancelled

Elon Musk has been quite active in the AI sector’s improvement as he has founded two AI-development companies, starting with OpenAI, the creators of ChatGPT, and the next xAI. Sam Altman has taken over the OpenAI and has made quite a name for itself. However, xAI has emerged as its biggest competitor. xAI has been using Oracle, the tech giants, and Nvidia AI-equipped H100 graphics processing units (GPUs) to train its AI chatbots.

Disagreements Cut the xAI Oracle Deal.

Oracle has been offering a supercomputer to the Elon Musk company under the $10 Billion xAI Oracle deal to build its AI-training infrastructure, more specifically training its Grok 2.0 AI chatbot. However, the deal was cut short because of the disagreements between the two over the timeline and power supply concerns. In a post, Elon Musk explained how Oracle is a good company, but they are looking for faster alternatives.

Oracle is a great company, and another company 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.

xAI Building A New Processing System

After finishing the xAI Oracle deal, Elon and the team have planned to build its  100k H100 processing system in Memphis, Tennessee, USA. This will be the fastest among others and will be powered by the Nvidia chips. However, the buying is directly with the Dell and Suprermicro.

xAI contracted for 24k H100s from Oracle and Grok 2 trained on those. Grok 2 is going through finetuning and bug fixes. Probably ready to release next month.

xAI is building the 100k H100 system itself for fastest time to completion. Aiming to begin training later this month.…

— Elon Musk (@elonmusk) July 9, 2024

Additionally, Musk’s company is now working on Grok 3.0, a spicy AI chatbot. It is supposed to be live by the end of the year. Grok 1.5 is already available to the people, and the Grok 2.0 will be live in August.

However, the xAI’s deal with Oracle over the AI model training stays as it is still renting 16,000 Nvidia chips. On the other side, Oracle has partnered with Microsoft for Nvidia-powered servers to handle the OpenAI workloads.

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