A potential billion-dollar deal between SAP competitor Oracle and xAI, Elon Musk's AI startup, will not happen. Oracle's stock reacts with a sharp drop.
Just a few weeks ago, AI hopes drove Oracle's stock to a new record high. Planned deals between the SAP competitor and Microsoft as well as ChatGPT inventor OpenAI had convinced investors. However, further collaboration in the AI segment has now been canceled: A billion-dollar deal with xAI, the AI startup of Tesla CEO Elon Musk, has fallen through.
According to a report from "The Information," the deal, which was purported to be worth ten billion US dollars, failed due to unrealistic demands from Musk. Specifically, it involved the construction time for a planned supercomputer – Musk wanted it to be completed faster than Oracle deemed feasible. Additionally, Oracle expressed concerns about the location choice of xAI, particularly regarding sufficient power supply.
With the deal, both parties would have expanded their cooperation, as xAI already has a contract to train AI models in Oracle's Gen2 Cloud. Elon Musk confirmed on his platform X that the deal with Oracle will not be pursued further.
Musk explained that xAI would now build the necessary supercomputer itself as the company is under intense time pressure in the AI segment. "The reason we decided to develop the 100,000-H100 and the next major system internally is because our fundamental competitiveness depends on being faster than any other AI company. Only in this way can we catch up.
The billionaire promised that the system would start training as early as this month. "It will be by far the most powerful training cluster in the world.
Musk emphasized that Oracle is a great company, but the fate of xAI depends on "being the fastest by far." One must have their hands on the wheel, not just sit in the backseat.
The Oracle stock plummeted after the announcement of the failed deal and lost 3.00 percent on the NYSE on Tuesday to 140.68 US dollars. On Wednesday, however, it showed an increase of 0.96 percent to 142.04 US dollars. The current record high is 145.79 US dollars.
