Is xAI a neocloud now?

On Wednesday, xAI and Anthropic announced a surprise partnership that sees the Claude-maker buying out all of the compute capacity at xAI's Colossus 1 data center—roughly 300MW. This deal, likely worth billions, allowed Anthropic to immediately raise its usage limits. Elon Musk explained that xAI had already moved training to a newer Colossus 2 facility, freeing up the older infrastructure. For xAI, this is a strategic pivot: with Grok usage declining after image generation issues, the company is prioritizing data center operations over AI model training. The deal adds significant revenue ahead of an expected IPO, and having Anthropic as a customer validates xAI's infrastructure ambitions, including Musk's plans for orbital data centers.

This partnership positions xAI as a neocloud business—buying GPUs from Nvidia and renting them to model developers. It's a stark contrast to rivals like Google and Meta, who prioritize reserving compute for their own AI products. Sundar Pichai recently admitted Google Cloud revenue is lower due to capacity constraints favoring internal AI, while Meta spun up its own cloud to ensure GPU power for Zuckerberg's ambitions. xAI's valuation at $230 billion far exceeds CoreWeave's (under $70B) despite managing comparable compute. By focusing on infrastructure—from terrestrial data centers to planned space-based facilities and custom chips at Terafab—xAI signals that its real business may be selling compute, not just building Grok.