Anthropic will pay xAI $1.25 billion per month for compute

In a striking move that has sent ripples through the AI sector, Anthropic has secured a monumental agreement to acquire 300 megawatts of computing power, effectively locking in the complete output of the Colossus 1 data center located near Memphis, Tennessee. The financial implications of this deal are substantial, with Anthropic set to pay xAI a staggering $1.25 billion each month until May 2029. Initially, xAI will offer a discounted rate for the first two months as they finalize their ramp-up. This agreement could potentially net xAI more than $40 billion in total revenue. The specifics of the deal surfaced from SpaceX’s recent S-1 filing with the SEC, which indicated that the arrangement enables the company to monetize otherwise unused computing capacity within its infrastructure. Notably, the contract includes a clause allowing either party to terminate the agreement with a 90-day notice. SpaceX expressed optimism about the future, stating, "We expect to enter into additional similar services contracts." This deal positions xAI uniquely within the AI marketplace, as most companies typically follow one of two paths: either constructing data centers for their own use or providing infrastructure for others, but seldom both at the same time. This innovative model, sometimes referred to as a 'neocloud,' allows AI firms to mitigate infrastructure costs by functioning as cloud providers when their own computing demands do not fully utilize their capacity. SpaceX contends that this strategy is a clever utilization of resources, claiming, "We believe our dual monetization strategy provides multiple pathways to generate returns on invested capital." However, the underlying message is clear: xAI may have overextended its computing capabilities and is now seeking ways to capitalize on this excess ahead of a public offering. The usage of Grok, xAI’s flagship AI assistant, has significantly declined in recent months, resulting in surplus servers that the company is now selling to one of its major competitors.