HPE stock spikes following Bloomberg report of $1 billion AI server deal with Musk's X

Investing.com -- Shares of Hewlett Packard Enterprise Co . (NYSE:HPE ) climbed over 3% Friday afternoon following a Bloomberg report that said the company secured a lucrative contract exceeding $1 billion with Elon Musk's social media platform X. The deal, which was finalized late last year, positions HPE to supply AI-optimized servers, a significant win over competitors Dell Technologies Inc. (NYSE:DELL ) and Super Micro Computer (NASDAQ:SMCI ) Inc.

The agreement, whose details were shared by sources wishing to stay anonymous, underscores the increasing demand for high-powered servers capable of managing AI workloads, the report noted. Musk's various ventures, including Tesla (NASDAQ:TSLA ) Inc. and xAI, have become prominent clients in the hardware space. Notably, xAI's supercomputer project in Memphis has incorporated hardware from both Dell and Super Micro.

HPE's success in securing the deal is a noteworthy endorsement of its AI server capabilities, which had previously been considered somewhat behind those of its rivals. The AI servers in question are equipped with advanced chips from companies like Nvidia Corp . (NASDAQ:NVDA ), which has seen explosive growth and a consequent boost in revenue for its server and system vendor clients.

This contract could mark a turning point for HPE's AI server business, which Chief Financial Officer Marie Myers discussed in a December earnings call. Myers highlighted the expectation of growing AI system adoption by enterprises and governments, though she noted that order patterns are anticipated to remain competitive and sporadic.

The overall market for data center infrastructure has been on the rise, with spending estimated to have jumped 34% to $282 billion in 2024, as reported by Synergy Research Group. The research firm pointed to Nvidia's significant growth as a major narrative in the industry, benefiting its server and system vendor clients through increased revenues.

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Source: Investing.com