Earlier this month, Anthropic surprised the tech world with a deal worth $1.25 billion per month to buy 300 megawatts of compute from xAI, securing all output from Colossus 1 in Tennessee.

This deal makes xAI look like it might be overbuilding its infrastructure or simply looking for ways to monetize extra capacity before a public offering, as usage of their flagship AI assistant Grok has dropped significantly. The terms allow either side to terminate the contract with 90 days' notice, but Anthropic is securing $40 billion in revenue over seven years.

The move positions xAI as a 'neocloud,' simultaneously building data centers for others while also using their own when capacity isn't fully utilized. SpaceX argues this dual monetization strategy provides multiple return pathways on invested capital, but the subtext hints at potential overcapacity issues.

Anthropic’s purchase signals the intensifying competition in the AI market as companies look to secure resources and build out their capabilities. This deal could change the dynamics of how AI services are provided and paid for in the future.