TSS Inc. Update; xAI's Colossus is indeed that..

Some new, staggering information

• So we know that any second phase of the xAI (Elon Musk's AI venture) isn't included in the TSS guidance, which just contains the base level that its main customer Dell guarantees (see our previous article).

• We also know that the baseload is at a very high Q3 level, and Dell and TSS were dealing with the initial phase of the xAI build-out, which was completed in four months.

• We also know that Dell and TSS will receive all of the second phase of the xAI build-out.

• And now we know that the second phase of the build-out is already underway (our emphasis):

In a landmark announcement at the Greater Memphis Chamber Annual Chairman’s Luncheon, xAI revealed plans for an expansion of its “Colossus” supercomputer facility. Building upon its initial commitment to Memphis announced last June (Link to previous release), the company is setting the stage for Memphis to become the global epicenter of artificial intelligence.

The expansion, already underway, will incorporate a minimum of one million Graphics Processing Units (GPUs), marking the largest capital investment in the region’s history. Additionally, Fortune 500 tech giants Nvidia, Dell, and Supermicro Computer (SMC) will be establishing operations in Memphis, further solidifying the city’s position as the “Digital Delta” – a moniker coined by FedEx founder Fred Smith and his son, FedEx Executive Richard Smith.

And now we know the scale is even much bigger than anticipated, one million GPUs, let that sink in for a moment. We remind people of the size of the first phase (our emphasis):

In the race to dominate the next wave of artificial intelligence, Elon Musk has taken a bold step forward with the launch of a new supercluster under his xAI venture. The system, powered by a staggering 100,000 Nvidia (NVDA) H100 GPUs, is located in Memphis, Tennessee, and was built in record time—just four months. Dubbed "Colossus," this supercomputer aims to become the most powerful AI training system in the world, accelerating the development of Musk's AI projects, including the free-speech chatbot, Grok… Looking ahead, xAI's plans for Colossus reflect Musk's ambition to lead the AI revolution. The system's capacity will continue to expand, potentially doubling to 200,000 GPUs in the coming months.

So 100K GPUs of the first phase (shared 50/50 by Dell and Super Micro), an additional 100K GPUs for the second phase (all going to Dell) now morphed into 1M GPUs (probably still involving some Super Micro as one might wonder whether Dell, or TSS for that matter, could handle such volume).

xAI will involve 1M GPUs, 10x larger than the first phase!

Funny enough, TSS shares have also sold off yesterday (as it does from time to time, nothing goes up in a straight line), so we think this is an excellent time to add.

Analyst's Disclosure: I/we have a beneficial long position in the shares of TSSI either through stock ownership, options, or other derivatives.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.