$46m Mkt Cap data center services company poised to benefit from Musk's xAI/Dell supercomputer project
With Dell commissioned to construct a massive supercomputer for xAI in Memphis, this initiative is poised to benefit the entire ecosystem of suppliers in the region. Here is our top pick offering asymmetric return potential.
Anyone following AI and X can't have missed Michael Dell's announcement that Dell will build an "AI factory with Nvidia," which will power Elon Musk's xAI and Grok.
We’re building a Dell AI factory with @nvidia to power @grok for @xai @elonmusk pic.twitter.com/2aTYLtCBup
— Michael Dell (@MichaelDell) June 19, 2024
Dell and SMC are collaborating with Elon Musk to construct a massive supercomputer, xAI/Grok, in Memphis. Dell is assembling half of the computer's racks, while SMC will supply the other half. Musk's involvement aims to create an AI powerhouse. This partnership may signify a new tech arms race, with Musk positioning Grok as a defensive measure against censorship.
To be precise, Dell is assembling half of the racks that are going into the supercomputer that xAI is building
— Elon Musk (@elonmusk) June 19, 2024
In no business ever is using two different suppliers, especially on rack servers, a good idea. But looking only at the Dell part, for large server contracts in the United States, Dell employs a combination of in-house assembly and subcontracting, depending on the scale and specific requirements of the project.
As this is likely a record-sized contract with no expenses spared, they are expected to enroll every subcontractor on the list. So, who are they? Here is our top pick, whose stock has seen a slight surge in volatility after the announcement but has yet to move.
Case summary and valuation one-pager below.
