Anthropic to Pay xAI $1.25B Monthly for Compute
▼ Summary
– Anthropic secured the entire output of xAI’s Colossus 1 data center, buying 300 megawatts of compute capacity.
– The deal is worth $1.25 billion per month through May 2029, with a discounted rate for the first two months, totaling over $40 billion in potential revenue for xAI.
– The agreement allows either party to terminate with 90 days’ notice, and xAI expects to enter into similar contracts in the future.
– xAI is adopting a “neocloud” model, acting as both a builder for its own use and a cloud provider for others to offset infrastructure costs.
– The deal suggests xAI overbuilt compute capacity due to declining usage of its Grok AI assistant, leading it to sell excess capacity to a competitor.
Earlier this month, Anthropic made waves across the AI sector by striking a deal to acquire 300 megawatts of compute power , essentially reserving the full output of the Colossus 1 data center near Memphis, Tennessee. As it turns out, that kind of massive infrastructure doesn’t come cheap. The company will be paying xAI $1.25 billion each month through May 2029, though a discounted rate applies for the first two months while xAI finishes its operational ramp-up. Over the life of the agreement, the total could exceed $40 billion in revenue for xAI.
Details of the arrangement surfaced in SpaceX’s S-1 filing with the SEC. According to the document, the deal “allows us to monetize unused compute capacity in our infrastructure.” Either party can walk away from the contract with just 90 days’ notice. The filing also signaled that more such deals are on the horizon: “We expect to enter into additional similar services contracts,” it stated.
This arrangement gives xAI a unique hybrid position in the AI marketplace. Most companies in the space either build data centers exclusively for their own use or construct them to lease to others. Rarely do they do both at the same time. This emerging model , sometimes called a “neocloud” , allows AI firms to offset their heavy infrastructure costs by selling access to their hardware when their own demand doesn’t fill the capacity.
SpaceX framed the deal as a smart financial move. “We believe our dual monetization strategy provides multiple pathways to generate returns on invested capital,” the company wrote. But the underlying story is hard to ignore. xAI appears to have overbuilt its compute capacity and needed a way to monetize it ahead of a potential public offering. Meanwhile, usage of Grok, xAI’s flagship AI assistant, has dropped significantly in recent months, freeing up servers that the company is now selling to one of its closest competitors.
(Source: TechCrunch)
