Anthropic will pay xAI $1.25 billion per month for compute
Quick Answer
Anthropic has secured a $1.25 billion per month deal with xAI for 300 megawatts of compute from the Colossus 1 data center until May 2029, potentially generating over $40 billion in revenue for xAI.
Quick Take
Anthropic has secured a $1.25 billion per month deal with xAI for 300 megawatts of compute from the Colossus 1 data center until May 2029, potentially generating over $40 billion in revenue for xAI. This arrangement allows xAI to monetize excess capacity while positioning itself uniquely in the AI market.
Key Points
- Anthropic's deal secures the entire output of Colossus 1 data center.
- xAI will receive $1.25 billion monthly, with a discounted rate for the first two months.
- The contract allows either party to terminate with 90 days' notice.
- xAI's Grok AI assistant usage has significantly declined, prompting this deal.
- This model, termed 'neocloud', enables dual monetization of compute resources.
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Earlier this month, Anthropic surprised the AI world with a deal to buy 300 megawatts worth of compute — securing the entire output of the Colossus 1 data center near Memphis, Tennessee.
Turns out, compute at that scale isn’t cheap. Anthropic will be paying xAI $1.25 billion per month through May 2029, with a discounted rate for the first two months as xAI completes its ramp-up. All told, the deal could bring xAI over $40 billion in revenue.
Details of the transaction emerged from SpaceX’s S-1 filing with the SEC. The deal, the company said, “allows us to monetize unused compute capacity in our infrastructure.” The terms of the deal allow either side to terminate the contract with 90 days’ notice.
“We expect to enter into additional similar services contracts,” the filing stated.
The move has given xAI a hybrid stance in the AI market. Most players either build data centers for themselves or build data centers for others to use — rarely both simultaneously. This emerging model, sometimes called a “neocloud,” lets AI companies offset infrastructure costs by acting as a cloud provider when their own usage falls short of capacity.
SpaceX argues the arrangement is a savvy use of resources. “We believe our dual monetization strategy provides multiple pathways to generate returns on invested capital,” it wrote. But the subtext is hard to miss. xAI appears to have overbuilt its compute capacity and needed to find a way to monetize it ahead of a public offering. 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.
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