Earlier this month, Anthropic surprised the AI industry by securing a massive deal for 300 megawatts of compute capacity, effectively taking over the entire output of xAI’s Colossus 1 data center located near Memphis, Tennessee.
Infrastructure at this scale comes with a premium price tag. Anthropic is set to pay xAI $1.25 billion per month through May 2029. The agreement includes a discounted rate for the initial two months as xAI completes its operational ramp-up. In total, the deal is projected to generate over $40 billion in revenue for xAI over the course of the contract.
The financial specifics of the transaction were revealed in SpaceX’s S-1 filing with the SEC. According to the company, the deal "allows us to monetize unused compute capacity in our infrastructure." The terms provide flexibility, allowing either party to terminate the contract with a 90-day notice period. Furthermore, the filing indicates that xAI expects to enter into additional similar service contracts in the near future.
This move places xAI in a unique "hybrid" position within the AI landscape. While most players typically build data centers for internal use or operate as dedicated cloud providers, xAI is adopting a "neocloud" model. This strategy enables AI companies to offset massive infrastructure expenses by operating as a cloud provider when internal demand falls below total capacity.
SpaceX frames the arrangement as a strategic use of resources, stating that its dual monetization strategy provides multiple pathways to generate returns on invested capital. However, the context suggests that xAI may have overbuilt its compute infrastructure and is now seeking monetization ahead of a potential public offering. With usage of xAI’s flagship assistant, Grok, declining in recent months, the company has found itself with surplus server capacity to sell to direct competitors like Anthropic.
