Anthropic and xAI announced a significant partnership this week, with Anthropic acquiring all compute capacity at xAI’s Colossus 1 data center in Tennessee.
On the latest episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane, and I explored what the deal means for xAI’s parent company SpaceX as it approaches going public and plans to dissolve xAI as a separate entity.
Kirsten provided a “positive view” on the partnership, highlighting a new revenue stream for xAI but noting it indicates xAI’s limited involvement in training its AI models, hampering its innovative image.
Sean questioned this optimism, viewing it as “a major heat check before the IPO.” While transitioning to a neocloud might appear feasible short-term, it potentially dampens long-term investor enthusiasm. Moreover, xAI faces an environmental lawsuit over Colossus 1.
In the conversation, Sean noted SpaceX, or xAI, struck a deal with Anthropic. Anthropic is taking over the computing center, Colossus 1, for its enterprise AI products. This move seems critical as it solves Anthropic’s compute needs.
SpaceX and xAI, now a neocloud, needed to utilize the extensive compute power without Grok, their consumer chat bot showing limited impact outside X.
Kirsten explained the neocloud concept, where companies buy GPUs from Nvidia and rent them rather than using them for their AI model training. Despite many companies renting data centers, they prefer using them for internal AI training — suggesting xAI’s limited model training involvement.
According to Anthony, Grok isn’t notable, linked to unsuitable content, and lacks cutting-edge features. Especially in enterprise AI, Grok isn’t popular for critical tasks.
Questions arise on xAI’s profitability, with infrastructure sales being a key revenue method.
Kirsten suggests finding a way to make money is positive. Yet, positioning SpaceX-xAI as innovative while merely renting GPUs conflicts with that image.
Sean, however, remains cynical, viewing this maneuver as preparation for the SpaceX IPO. Reports indicate xAI employees used other models, not Grok, and following SpaceX’s acquisition, significant co-founder departures occurred, except Elon Musk. Now, the plan is dissolving xAI into SpaceX, with “SpaceXAI” emerging.
This approach might draw near-term investor interest, viewed as reliable over frontier lab development. It presents a tension during the IPO process, but may not attract significant outside investment typical for frontier labs.