Elon Musk’s AI startup, xAI, is planning to construct a supercomputer in Memphis, Tennessee, the Wall Street Journal reported. This initiative aims to enhance the company’s AI capabilities, positioning it to compete with rivals like OpenAI’s ChatGPT, Microsoft (NASDAQ:MSFT), and Alphabet’s (NASDAQ:GOOGL) Google.
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While investment details are still being finalized, the supercomputer will be located at an old manufacturing facility and will need approval from local and regional authorities.
Musk Ramps Up Expansion Efforts
Musk launched xAI last year after the success of OpenAI’s ChatGPT. Since then, he has aggressively expanded the company and developed Grok, an AI chatbot. Currently, xAI depends on Oracle (NYSE:ORCL) for its data center needs. The impact of the new Memphis facility on its partnership with ORCL remains uncertain.
xAI could leverage Musk’s other businesses, like Tesla (NASDAQ:TSLA) and social media platform X, to train its AI models. It’s worth noting that xAI secured $6 billion in a second round of funding, which it plans to use for launching its first product, accelerating research and development, and developing advanced infrastructure.
Additionally, the company is pursuing partnerships to expand. A recent Financial Times report highlighted that xAI is competing with Meta (NASDAQ:META) to partner with Character.ai, a company specializing in chatbots to emulate various personas using large language models (LLMs).
Musk’s Tesla is Witnessing Challenges
While Musk is expanding its AI business, his golden child, Tesla, faces challenges amid weak demand and rising competition. TSLA stock is down about 30% year-to-date, underperforming the S&P 500’s (SPX) 12.3% gain.
Is Tesla a Buy, Sell, or Hold?
Though Tesla stock is under pressure, it plans to introduce new models and launch affordable versions. Moreover, Tesla is focusing on lowering vehicle costs to improve its margins. However, Wall Street remains sidelined on TSLA stock due to demand concerns.
With nine Buys, 14 Holds, and nine Sell recommendations, Tesla stock has a Hold consensus rating. The analysts’ price target on TSLA stock is $174.60, implying about 0.23% downside potential from current levels.
