Anthropic to pay xAI $1.25B monthly for compute through 2029

Anthropic has committed to a monthly payment of $1.25 billion to xAI until May 2029 for the complete output from the Colossus 1 data center located near Memphis, Tennessee, which provides 300 megawatts of computing power. This agreement, revealed in a SpaceX SEC filing, features a reduced rate for the initial two months as xAI increases its operations and has the potential to bring in over $40 billion in revenue for xAI. Either side can terminate the contract with a 90-day notice. This deal positions xAI as a hybrid entity in the AI sector, utilizing a 'neocloud' model to capitalize on excess capacity. SpaceX noted that the agreement enables them to monetize unused computing resources and anticipates similar future contracts. The context hints at xAI having overextended its capacity due to a drop in demand for its Grok assistant, which is now being sold to a rival.