Elon Musk’s AI venture xAI is reportedly set to spend $10 billion on Oracle cloud servers.

The two companies are in talks over a multi-year agreement that would make xAI one of Oracle’s biggest customers, according to a report in The Information, which cites a source familiar with the discussions.

Elon Musk – Bret Hartman / TED

Musk needs more compute power to help xAI compete with rival AI labs such as OpenAI and Anthropic, which have struck multi-billion dollar investment deals with Microsoft and Amazon respectively to gain access to the cloud computing infrastructure needed to train and run large language models. Microsoft and OpenAI are said to be considering spending up to $100 billion on a 5GW AI data center known as Stargate.

xAI is reportedly finalizing a $6 billion funding round, and The Information says Musk told potential and existing investors on a recent call that most of this cash will be spent on renting infrastructure.

The company released its first service, a chatbot known as Grok, last year, making it available for paid users of social media platform X, formerly known as Twitter. Grok 2.0 is currently in development, Musk said last month it is being trained using 20,000 of Nvidia’s H100 GPUs. He expects Grok 3.0 will require 100,000 GPUs.

Musk and Oracle founder Larry Ellison have a long-term friendship, with Ellison have previously served as a director at another Musk company, Tesla.

Ellison revealed in December that xAI is already a major Oracle customer. “We got enough Nvidia GPUs for Elon Musk's company xAI to bring up the first version, the first available version of their large language model called Grok,” he said. “They got that up and running. But, boy, did they want a lot more. Boy, did they want a lot more GPUs than we gave them.”

The Information says xAI currently rents 15,000 H100s from Oracle. Neither company responded to requests for comment when contacted by the publication.

AI infrastructure is proving a lucrative income stream for Oracle, and Ellison said in March that the company has more data centers in the development, including what he described as the “world’s largest” facility, to help meet demand.

Following reports of the potential deal with xAI, Oracle's shares jumped by 5.3 percent.