Hewlett Packard Enterprise (HPE) has signed a contract exceeding $1 billion to provide AI servers for X, the platform formerly known as Twitter, according to Bloomberg.
The deal represents a critical endorsement of HPE’s technology as the company reportedly edged out leading competitors Dell and Supermicro. While the finer details remain confidential, the agreement underscores HPE’s growing clout in the rapidly expanding AI server market.
HPE declined to comment to Network World on the development.
A pivotal win in a competitive market
The deal was finalized in late 2024, and came after a rigorous bidding process that saw HPE competing against industry heavyweights Dell and Supermicro, Bloomberg reported.
Earlier last year, another Elon Musk firm, xAI, shifted its AI server deal from Supermicro to Dell. Analysts believed Musk would go with Dell for future such requirements.
HPE has historically trailed behind the two rivals in AI server sales, so this win signals a notable shift and a clear sign of confidence in HPE’s AI offerings.
The financial scope of the deal underscores its significance. Analysts see HPE’s landmark $1 billion deal with X as a major endorsement of its AI capabilities, but competition remains fierce in the high-growth AI server market.
“HPE’s $1 billion deal with X not only enhances its credibility but also highlights its recognition for high-performance computing capabilities,” said Rachita Rao, senior analyst at Everest Group. “While HPE focuses on software-integrated AI infrastructure, Dell’s strong partnership with Nvidia and scalable AI solutions tailored for mid-market customers position it as a major competitor. Supermicro, despite its robust AI server capabilities, is currently grappling with challenges stemming from accounting irregularities, which may hinder its market position.”
Musk’s expanding AI ambitions
Elon Musk’s well-documented commitment to AI advancements adds context to the scale of this agreement.
Musk’s ventures, including Tesla and xAI, have been among the most prominent adopters of AI infrastructure. Notably, xAI’s Colossus supercomputer, built by Dell with 100,000 Nvidia H100 GPUs, is already a game-changer in the AI domain.
This new partnership between X and HPE could potentially fuel Musk’s vision of integrating advanced AI capabilities into his companies. For instance, Musk recently revealed plans to incorporate xAI’s Grok chatbot into Tesla vehicles, allowing users to interact with their cars using conversational AI.
The deal also underscores evolving technology needs. “Nvidia’s Blackwell technology is likely to drive demand for liquid cooling solutions to manage heat-intensive AI workloads. While scalable infrastructure and compute power are critical now, future growth will hinge on customized AI models requiring specialized chips like ASICs and FPGAs for optimized performance,” Rao noted.
She added that the industry’s ability to address evolving networking needs for LLM training will be pivotal in driving large-scale AI adoption.
Strategic implications for enterprises
HPE’s win is significant for enterprise AI customers looking to build or scale robust AI infrastructures. The increasing demand for AI servers among businesses developing sophisticated applications reflects the burgeoning potential of AI across industries. Musk’s X, already pivoting toward becoming a global everything app, will likely leverage this advanced compute power for real-time recommendation engines, generative AI tools, and operational analytics.
According to IDC, AI servers accounted for roughly 23% of the overall server market in 2023 and are expected to take up an even larger share in the coming years. By 2027, the AI server market is projected to generate $49.1 billion in revenue, driven largely by the growing dominance of GPU-accelerated servers among various types of accelerators.
However, challenges remain.
With AI systems consuming vast computational resources and requiring seamless integration into existing operations, enterprises must carefully navigate the cost-to-performance trade-offs inherent in such large-scale deployments.
The agreement could also set a precedent for other enterprises, particularly within Musk’s ecosystem. “This deal may also influence procurement strategies within Musk’s ecosystem, potentially setting a benchmark for advanced AI infrastructure adoption,” Rao said.
The road ahead for HPE and AI server providers
This deal cements HPE’s position as a formidable player in the AI server ecosystem, breaking new ground in a segment dominated by Dell and Supermicro. The contract also signals growing reliance on enterprise-grade AI technologies, as major platforms and enterprises race to secure the necessary infrastructure to support advanced applications.
HPE reported a 32% year-over-year surge in revenue for its server segment, reaching $4.7 billion for the fourth quarter. This includes a 16% sequential growth in AI server revenue, as highlighted in HPE’s earnings report for its fiscal fourth quarter of 2024.
As AI reshapes enterprise operations and consumer interactions, investments like X’s $1 billion deal with HPE exemplify the pivotal role of computing infrastructure in driving the future. For HPE, this win not only enhances its market position but also sets a high bar for competitors as demand for AI-powered solutions continues to grow globally.
Source:: Network World