$46m Mkt Cap data center services company poised to benefit from Musk's xAI/Dell supercomputer project

With Dell commissioned to construct a massive supercomputer for xAI in Memphis, this initiative is poised to benefit the entire ecosystem of suppliers in the region. Here is our top pick.

Anyone following AI and X can't have missed Michael Dell's announcement that Dell will build an "AI factory with Nvidia," which will power Elon Musk's xAI and Grok.

We’re building a Dell AI factory with @nvidia to power @grok for @xai @elonmusk pic.twitter.com/2aTYLtCBup

— Michael Dell (@MichaelDell)June 19, 2024

Dell and SMC are collaborating with Elon Musk to construct a massive supercomputer, xAI/Grok, in Memphis. Dell is assembling half of the computer's racks, while SMC will supply the other half. Musk's involvement aims to create an AI powerhouse. This partnership may signify a new tech arms race, with Musk positioning Grok as a defensive measure against censorship.

To be precise, Dell is assembling half of the racks that are going into the supercomputer that xAI is building

— Elon Musk (@elonmusk)June 19, 2024

In no business ever is using two different suppliers, especially on rack servers, a good idea. But looking only at the Dell part, for large server contracts in the United States, Dell employs a combination of in-house assembly and subcontracting, depending on the scale and specific requirements of the project.

As this is likely a record-sized contract with no expenses spared, they are expected to enroll every subcontractor on the list. So, who are they? Here is our top pick, whose stock has seen a slight surge in volatility after the announcement but has yet to move.

Case summary and valuation one-pager below.