(Bloomberg) — Hewlett Packard Enterprise Co. won a deal worth more than $1 billion to provide Elon Musk’s Social Network X with servers optimized for artificial intelligence work.
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The deal closed late last year, according to people familiar with the matter who asked to remain anonymous because the deal was private. Competitors Dell Technologies Inc. and Super Micro Computer Inc. have also offered to sell the equipment.
HPE declined to comment.
Computing demand to run AI workloads has led to a boom for high-powered server makers like HPE. Musk’s companies, including Tesla Inc. and xAI, have become major customers for the hardware. A supercomputer project built by xAI in Memphis used a mix of Dell and Super Micro servers.
Companies led by Musk are known for sharing employees, technology and computing power. AI startup xAI’s main product, a chatbot called Grok, is primarily available to paid users of X, the social network formerly known as Twitter.
HPE shares jumped as much as 4.3% before paring some gains to close up less than 1% at $22.08 in New York. Dell shares slipped 3.8% to $114.77. Super Micro shares were little changed at $32.60.
Despite its growth, HPE’s AI server business was seen as relatively lagging behind Dell and Super Micro. The agreement with Musk represents a vote of confidence in HPE’s offerings. AI servers contain high-powered chips from companies such as Nvidia Corp.
HPE’s liquid cooling technology may have played a role in this victory, wrote Bloomberg Intelligence analyst Woo Jin Ho. While good for sales, larger transactions can weigh on margins, he added.
In a statement, Super Micro said it continues “to have strong partnerships with all of our customers, including X, as we build world-leading AI data centers,” and that its “ Liquid-cooled technology remains in high demand.” Dell has not commented. X did not respond to requests for comment.
In 2025, HPE expects “increasing adoption of AI systems by enterprises and governments, although we expect orders to remain competitive and irregular,” Chief Financial Officer Marie Myers said on a conference call on the results in December.
Spending on data center infrastructure is estimated to have jumped 34% to $282 billion in 2024, according to a report from Synergy Research Group. “The big story among vendors has been Nvidia’s explosive growth,” Synergy analysts wrote, adding that “this has largely translated into increased revenue from its server and systems vendor customers.”