Elon Musk’s xAI Ditches Supermicro for Rivals in $6 Billion AI Server Deal!

Elon Musk’s AI firm, xAI, has recently transferred all of its AI server orders from the embattled Supermicro to Dell, as reported by UDN.com. This switch is a boon for Dell, already a leading server manufacturer, and its suppliers, Inventec and Wistron. For Supermicro, however, losing a multi-billion-dollar client like xAI amidst potential delisting from NASDAQ could be a crippling setback.

Both Dell and Supermicro were key suppliers to Musk’s enterprises, including xAI and Tesla. Musk has previously been seen in public with Supermicro’s CEO, Charles Liang, discussing xAI’s significant investment in Supermicro’s liquid-cooled AI servers. But following a U.S. Department of Justice investigation into Supermicro for alleged accounting fraud and illegal exports to China and Russia, which led to a staggering 35% drop in its stock in a single day, Musk’s businesses opted to redirect their orders away from the company, according to UDN.

Dell, a major player in the AI server market, is strategically positioned to take on these new orders. Wistron, tasked with producing motherboards for Dell’s AI servers and performing certain assembly operations, stands to gain significantly from this shift. Wistron is currently ramping up its production capabilities, especially in its three facilities in Hsinchu, Taiwan, and its operations in Mexico, in response to the booming demand for AI servers. The company is targeting triple-digit growth annually in this sector.

Inventec, another principal supplier for Dell, is also set to benefit from this realignment of orders. A long-time participant in AI server production and one of Dell’s top three global server assembly partners, Inventec has been focusing on machines powered by Nvidia’s Hopper processors this year. UDN reports that Inventec is prepped to start mass production of servers using Nvidia’s upcoming Blackwell-based machines, equipped with B200 and B200A GPUs, by the first quarter of 2025. With available production capacity in Mexico, Inventec is well-prepared to increase its output of AI servers for clients previously served by Supermicro.

Supermicro’s looming troubles involve delayed financial filings, which have placed the company in jeopardy of NASDAQ delisting. To stave off delisting, Supermicro was required to submit a plan by November 16 detailing the cause of the delays and a timeline for filing the necessary 10-K annual report. Given that November 16 was a Saturday, the final deadline was pushed to November 18.

Should Supermicro be delisted, the consequences could be severe, potentially including a drastic drop in stock value and the immediate need to repay $1.725 billion in convertible notes, which could deeply damage the company’s financial health.