In a significant development for the artificial intelligence sector, Anthropic has finalized a deal to secure 300 megawatts of compute capacity from xAI. The agreement grants Anthropic exclusive access to the output of the Colossus 1 data center located near Memphis, Tennessee. This strategic partnership highlights the escalating demand for high-performance computing power as companies race to scale their large language models.

Financial disclosures reveal the scale of the commitment, with Anthropic set to pay xAI $1.25 billion per month through May 2029. While the contract includes a discounted rate for the initial two-month ramp-up period, the total value of the deal could reach approximately $40 billion. The agreement includes a provision allowing either party to terminate the contract with 90 days’ notice, providing a degree of flexibility in a rapidly shifting market.

This arrangement underscores a growing trend in the industry known as the “neocloud” model, where AI firms leverage their own infrastructure as a service to offset massive capital expenditures. By monetizing unused compute capacity, xAI is effectively balancing its internal development needs with external revenue generation. The move comes as xAI seeks to optimize its infrastructure utilization, particularly as it navigates the high costs associated with maintaining large-scale data centers.