Tesla, xAI to Continue Nvidia, AMD Chip Purchases Amid AI Expansion

Elon Musk, the CEO of Tesla, has announced that both Tesla and his artificial intelligence company, xAI, will continue to purchase chips from semiconductor giants Nvidia and AMD. This decision underscores the critical role of advanced chip technology in the development of AI capabilities. Musk revealed that xAI has already installed 200,000 GPUs at its Colossus facility in Memphis, Tennessee, and plans to build another facility in the Memphis suburbs equipped with 1 million GPUs. This significant investment in GPU technology highlights the company's commitment to staying at the forefront of AI innovation.

Musk's statements came during an interview where he also addressed rumors about a potential merger between Tesla and xAI. He denied these rumors, stating that there are no current plans for a merger, although he did not completely rule out the possibility in the future. This clarification comes at a time when xAI has recently completed the acquisition of the social media platform X (formerly Twitter) through a full-stock transaction, valuing xAI at 80 billion and X at 45 billion, including 12 billion in debt. This acquisition has sparked speculation about Musk's broader strategy to integrate his business empire.

Musk's comments on chip procurement also shed light on the competitive landscape in the semiconductor industry. Despite Tesla's efforts to develop its own AI chips, such as the Dojo system, Musk acknowledged that Nvidia's products remain superior. This admission underscores the importance of Nvidia and AMD in the AI chip market, as their advanced GPUs are essential for supporting the AI initiatives of both Tesla and xAI. Musk's decision to continue purchasing from these suppliers ensures that his companies have access to the best available technology, which is crucial for maintaining their competitive edge in the rapidly evolving AI sector.

In the automotive sector, Musk highlighted that Tesla's Dojo supercomputer, located in Buffalo, New York, is being utilized for training its autonomous driving and Optimus robot systems. He described xAI's Colossus facility as "the most powerful training cluster in the world today," with over 200,000 GPUs working in tandem. The decision to build in Memphis was praised by local authorities for its potential to transform the region into a high-tech manufacturing hub. However, the project has faced community backlash due to its high energy and water consumption, particularly xAI's reliance on natural gas turbines for power, which emit nitrogen oxides linked to respiratory diseases. Environmental activists have raised concerns that xAI may be violating the Clean Air Act and local regulations for major air polluters.

Musk also predicted that the current bottleneck in AI development, which is chip availability, will soon shift to a shortage of power generation equipment. He forecasted that by mid-2026, AI companies may face a fundamental shortage of electricity. Musk compared China's investments in power generation, which he noted have surpassed those of the United States. This prediction underscores the growing demand for energy as AI technologies advance, posing new challenges for the industry.