Apple Ventures into AI Data Center Space with $1 Billion NVIDIA Deal in Generative AI Push

In a notable shift, Apple Inc. (AAPL) is moving into the highly competitive AI data center arena, placing a substantial order with NVIDIA Corp. (NVDA) for the GB300 NVL72 systems valued at approximately $1 billion. The purchase, equivalent to around 250 servers, marks Apple's strategic entry into the sphere dominated by giants investing heavily in AI-centric infrastructures.

According to Loop Capital analyst Ananda Baruah, Apple is collaborating with server manufacturers Dell Technologies and Supermicro to build a large-scale server cluster. This collaboration is aimed at supporting generative AI applications, signifying Apple's official plunge into the generative AI race. Supermicro and Dell have emerged as key partners in this venture, potentially involved in crafting a large language model (LLM) cluster.

This operational pivot is believed to stem from challenges Apple faced in the deployment of its AI-powered Siri digital assistant. Persistent difficulties have forced the company to delay the new Siri indefinitely. Previously, Apple had unveiled Siri's AI capabilities at its Worldwide Developers Conference, hoping for an early market release this year.

Reports suggest that these postponements led Apple to reassess its executive team, with one executive describing the delays as "unseemly" and "embarrassing" given Apple's prior marketing claims about its AI prowess. These setbacks have evidently nudged Apple to intensify its focus on data center strategies, aligning its resources more strategically in the AI domain.

This move had a noticeable impact on the stock market on Tuesday. Apple shares rose by 1.4% to close at $223.75, while NVIDIA saw a dip of 0.6% to $120.69. Stocks for Dell slipped by 1% to $98.82, and Supermicro experienced a 2.6% decrease to $40.64.

Loop Capital maintains a "neutral" rating on Apple stock, whereas it holds a "buy" rating for NVIDIA, Dell, and Supermicro stocks, indicating confidence in the latter companies' growth prospects amid this shifting landscape.