xAI and Anthropic have partnered up, with Anthropic buying out xAI’s Colossus 1 data center, valued at around $30 billion. This move has shifted xAI from a consumer to a provider of compute resources, likely driven by Grok’s declining usage. The deal is seen as strategic for SpaceX's IPO plans.

While the partnership could be seen as a shot at OpenAI amid legal battles, Elon Musk suggests it was due to xAI moving training to a newer data center, Colossus 2. This move signals xAI might focus more on building data centers rather than training AI models.

The broader context is that tech giants like Google and Meta are choosing to preserve their compute resources for internal projects over renting them out. This suggests a shift in strategic priorities towards AI-powered product development, where computing power is a key asset for future success.

However, xAI’s new neocloud business model, with its reliance on purchasing GPUs from Nvidia and renting them out, could face challenges due to chip shortages and fluctuating demand. Musk's version of this business might include space-based data centers by 2035, but the core economics remain tough.

These developments raise questions about xAI’s future ambitions in software projects like coding and digital twins, which require significant computing resources. As long as xAI continues to sell large quantities of compute to competitors, these long-term goals might be at risk.