The AI infrastructure boom: A business case for on-prem hardware

HPE’s $1 billion deal to provide AI-optimised servers to Elon Musk’s X has sent ripples through the tech world. While the sheer size of the deal is impressive, the real story lies in what it reveals about the enduring power of on-premises hardware, especially for organisations pushing the boundaries of artificial intelligence. The deal sends a strong market signal: It validates the business case for investing in robust, dedicated infrastructure to support demanding workloads.

The AI powerhouse: Why X chose on-prem

X’s decision to invest so heavily in on-premises infrastructure speaks volumes. And it’s far from an isolated incident. According to IDC, global AI infrastructure spending reached AUD$230 billion in 2025 and is projected to surpass $300 billion by 2028. Servers account for the bulk of this spend, which is fuelling the unprecedented growth of the server market. TrendForce estimates that AI servers account for 70% of total server purchases in 2025, driving a 46% YoY increase in overall server spend.

The reason for this on-prem resurgence? AI workloads require immense processing power and low latency. In achieving this, dedicated hardware often outperforms even the most scalable cloud solutions. Here’s why:

• Performance Primacy: AI algorithms, particularly those used for machine learning and deep learning, are computationally intensive. They thrive on the raw, dedicated power and low latency of on-premises infrastructure. Specialised hardware, like HPE’s liquid-cooled servers designed specifically for AI, can deliver the performance edge needed for complex computations and massive datasets, an advantage sometimes difficult to achieve in shared cloud environments.

• Cost Predictability & Control: While cloud computing offers appealing pay-as-you-go models, costs can quickly escalate with the unpredictable nature of AI workloads. A report by Tangoe found that AI demands have led to a 30% increase in overall cloud spending. As a result, 72% of IT leaders say AI-driven cloud expenditure is becoming “unmanageable”. Owning and managing your own hardware offers greater predictability in AI infrastructure budgeting and can lead to significant long-term cost savings. This is particularly crucial for organisations running large-scale AI initiatives.

• Data Fortress: Security and Sovereignty: For organisations dealing with sensitive data, maintaining full control over their infrastructure is paramount. On-premises hardware allows for implementing customised security measures and ensures compliance with strict data governance regulations, something that can be more complex to navigate in shared cloud environments. This direct control is invaluable for industries with stringent compliance requirements.

On-prem doesn’t mean cloud repatriation

While on-prem hardware is the ideal solution for complex AI Infrastructure, cloud environments remain critical. A hybrid approach delivers the best of both worlds: leveraging the agility and scalability of cloud for innovation, while preserving the control and assurance of on-prem systems for sensitive workloads.

When planning for AI, it’s not about choosing between cloud and on-premises. The key to success is aligning your infrastructure with your business goals. On-prem and cloud have their unique advantages. So, if you’re using them effectively, the best results come from a balanced, strategic approach.

Maximising your AI infrastructure investment: The critical role of Hardware Maintenance

Investing in powerful on-premises hardware is only the first step. Ensuring its continuous, high-performance operation is where a robust hardware maintenance strategy becomes essential. A robust hardware strategy goes beyond just fixing things when they break. It means proactively optimising your infrastructure for peak performance while minimising costly downtime.

• Proactive Prevention: A comprehensive hardware maintenance plan includes regular inspections, preventative maintenance, and proactive upgrades to ensure your systems are always running smoothly. This minimises the risk of unexpected failures and keeps your AI workloads operating without interruption.
• Rapid Response: When issues do arise, a swift and effective response is crucial. A dedicated hardware maintenance partner can provide rapid on-site support, minimising downtime and reducing the issue’s impact on your operations. This fast response is particularly important for time-sensitive AI applications.
• Expert Optimisation: Continuous optimisation is key to effective hardware maintenance. Experienced technicians can fine-tune your systems, ensuring they are configured for peak performance and efficiency. This ongoing optimisation can significantly extend the lifespan of your hardware and maximise your return on investment.

Interactive: Your on-premises advantage

Interactive specialises in optimising on-premises hardware performance through tailored maintenance solutions. Our expertise ensures your systems are always operating at their best, maximising your AI investment and minimising disruptions. We offer:

• Customised Maintenance Plans: We work with you to develop a maintenance strategy that aligns with your specific needs and budget, ensuring maximum uptime and performance for your critical AI workloads.
• Proactive Support & Rapid Response: Our team of expert technicians provides proactive support and rapid on-site assistance, minimising downtime and keeping your AI initiatives on track.
• Expert Optimisation & Long-Term Value: We go beyond break-fix support, offering continuous optimisation and proactive upgrades to maximise the lifespan of your hardware and ensure you get the most out of your investment.

The future of AI: Powered by on-prem performance

HPE’s deal with X signals a crucial truth: while cloud computing plays a valuable role in the IT landscape, on-premises infrastructure remains essential, especially for organisations at the forefront of AI innovation. By investing in robust hardware and partnering with a dedicated maintenance provider like Interactive, you can unlock the full potential of your on-premises infrastructure and drive your AI initiatives forward.

Ready to optimise your on-premises infrastructure and ensure peak performance for your critical workloads? Contact Interactive today to discover how our hardware maintenance services can empower your organisation. Let’s discuss how we can help you maximise uptime, minimise disruptions, and achieve your IT goals.