Earlier this month, Anthropic surprised the AI world by signing a deal to buy 300 megawatts worth of computing. This secures the entire output of the Colossus 1 data center near Memphis, Tennessee.
As it turns out, computing at this scale doesn’t come cheap. Anthropic plans to pay xAI $1.25 billion per month through May 2029, with discounted rates for the first two months as xAI completes its ramp-up. All told, the deal could net xAI more than $40 billion in revenue.
Details of the transaction were revealed in SpaceX’s S-1 filing with the SEC. The company said the deal “allows us to monetize unused computing power within our infrastructure.” Under the terms of the agreement, either party can terminate the agreement with 90 days’ notice.
“The Company intends to enter into additional similar service agreements,” the filing states.
This move gives xAI a hybrid position in the AI market. Most players either build data centers for themselves or build data centers for others to use, but rarely both at the same time. This new model, also known as “neocloud,” allows AI companies to offset infrastructure costs by acting as cloud providers when their own usage runs out of capacity.
SpaceX claims the deal is a wise use of resources. “We believe our dual monetization strategy provides multiple avenues to generate returns on invested capital,” the company said. However, the meaning behind it cannot be overlooked. xAI appears to have overbuilt its computing power, meaning it needs to find a way to monetize it before going public. Usage of xAI’s flagship AI assistant, Grok, has dropped significantly in recent months, and the company is now selling its empty servers to one of its closest competitors.
