Anthropic to pay xAI $1.25 billion monthly for compute capacity

Earlier this month, Anthropic announced a deal to buy 300 megawatts’ worth of compute capacity. Under the terms of the agreement, Anthropic is paying xAI $1.25 billion per month for this compute capacity, with the payment period scheduled to run through May 2029. This massive infrastructure arrangement secures compute capacity from the Colossus 1 data center, which is located near Memphis, Tennessee. Through this partnership, xAI acts as the compute provider and the recipient of the payments, while Anthropic secures the necessary infrastructure for its operations.

The details of the transaction were disclosed in an S-1 filing—which is an SEC registration document for a public offering—by SpaceX. In the filing, SpaceX explained that the deal “allows us to monetize unused compute capacity in our infrastructure.” The company indicated that it expects to enter into additional similar services contracts in the future. SpaceX also stated that it believes this dual monetization strategy provides multiple pathways to generate returns on invested capital.

The financial and operational terms of the transaction include:

• A monthly payment of $1.25 billion from Anthropic to xAI.
• A total potential revenue that could bring xAI over $40 billion.
• A termination clause that allows either side to terminate the contract with 90 days’ notice.

This transaction highlights the emergence of a “neocloud” model, which is a model where AI companies act as cloud providers to monetize unused compute capacity. By selling excess capacity, AI firms can offset their massive infrastructure costs when their own usage falls short of their total capacity. This model allows xAI to operate both as a developer of its own products, such as its flagship AI assistant Grok, and as an infrastructure provider for competitors. The deal also suggests that xAI appears to have overbuilt its compute capacity and needed to find a way to monetize it ahead of a public offering.

Why it matters

The deal highlights an emerging “neocloud” model where AI companies offset infrastructure costs by acting as cloud providers when their own usage falls short of capacity. Additionally, the transaction suggests xAI may have overbuilt its compute capacity.