Super Micro Computer (NASDAQ:SMCI) stock rose on the news that it is supporting Elon Musk’s Grok project for xAI. SMCI notably assembles server racks with Nvidia (NASDAQ:NVDA) chips, which Musk is buying in abundance.
Shares of SMCI stock that opened at $896 on June 18 opened this morning at $968, a gain of nearly 8% in one trading day. The market capitalization starting June 20 is about $56.5 billion.
Dell Technologies (NASDAQ:DELL) also has a piece of that contract, and its stock is benefiting. Since June 18, its shares have jumped from $143.50 to $156, adding nearly $10 billion to Dell’s market cap.
Grok This, Cloud Czars
Musk is building what he calls an “AI gigafactory” to support the latest version of Grok, his artificial intelligence (AI) project at xAI. He has said the project will consume 100,000 of Nvidia’s H-100 “Hopper” chips, four times more than what’s being used by any other project.
In addition to the H-100 chips, Musk has said he wants to buy 300,000 B-200 “Blackwell” chips once they’re available to add to the cluster.
The speed with which Grok is being assembled underlies how Nvidia has changed the computing game with its AI chips. For over a decade, the global tech economy has been dominated by five scaled “Cloud Czars” with networks of hyperscale data centers. Now, Nvidia is letting other companies get into the game quickly, and Musk wants to be one of them.
Musk has been putting all his personal energies into the project. He diverted 50,000 Nvidia chips to Grok from Tesla (NASDAQ:TSLA), where he’s CEO, claiming Tesla wasn’t ready for them. While Tesla is publicly traded, xAI is wholly owned by Musk.
The problem with all this is the chips’ energy requirements. A single H-100 requires 1,000 watts of power, while the B-200 will require 1,875. Texas’ ERCOT system is not connected to the other U.S. electric grids, making brownouts common in bad weather.
SMCI Stock: What Happens Next?
Musk is using his personal fortune to become a Cloud Czar, but his business model is unproven. So long as his checks don’t bounce, this is great for Nvidia, SMCI and Dell.
As of this writing, Dana Blankenhorn had a LONG position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
