Earlier this month, Anthropic made waves in the AI industry by finalizing a deal to acquire 300 megawatts of computing power—essentially taking over the full output of the Colossus 1 data center located near Memphis, Tennessee. As it turns out, such massive compute capacity does not come cheap. Anthropic is set to pay xAI $1.25 billion each month until May 2029, though the first two months will be at a discounted rate as xAI completes its operational ramp-up. Over the life of the agreement, this deal could generate more than $40 billion in revenue for xAI.

Details of the arrangement emerged from SpaceX’s S-1 filing with the SEC. According to the filing, the contract “allows us to monetize unused compute capacity in our infrastructure.” Either party can terminate the agreement with 90 days’ notice. The filing also noted, “We expect to enter into additional similar services contracts.”

This move has placed xAI in a unique hybrid position within the AI landscape. Most companies in the sector either build data centers for their own exclusive use or construct them to rent out to others—rarely do they do both simultaneously. This emerging model, sometimes referred to as a “neocloud,” enables AI firms to offset infrastructure costs by acting as a cloud provider when their own usage doesn’t fill available capacity.

SpaceX argues that this dual approach is a smart use of resources. “We believe our dual monetization strategy provides multiple pathways to generate returns on invested capital,” the filing stated. Yet the underlying message is clear: xAI appears to have overbuilt its compute capacity and needed a way to monetize that excess ahead of a potential public offering. Usage of Grok, xAI’s flagship AI assistant, has dropped sharply in recent months, freeing up servers that the company is now selling to one of its closest rivals.