Anthropic and xAI have finalized a significant partnership agreement, under which Anthropic will take over the entire compute capacity of xAI’s Colossus 1 data center located on Riverport Road in Memphis, Tennessee. The deal, which provides Anthropic with immediate access to massive compute resources for its enterprise-focused AI products, marks a strategic pivot for the infrastructure previously utilized by xAI.
The agreement arrives as SpaceX, the parent company of xAI, moves toward a potential initial public offering. During a recent episode of the Equity podcast, TechCrunch reporters Kirsten Korosec, Sean O’Kane, and Anthony Ha discussed the implications of the move, noting that the partnership may signal that xAI is stepping back from training its own frontier AI models. Korosec suggested that while the deal establishes a clear revenue stream, it complicates xAI's branding as an independent, innovative AI developer.
Sean O’Kane characterized the arrangement as a "major heat check before the IPO," questioning the long-term viability of the pivot. O’Kane argued that while transitioning to a "neocloud" business model might provide a more stable structure for potential investors, it lacks the transformative potential typically required to excite the market. He further noted the timing of the announcement, which occurred while public attention was largely diverted by a major ongoing trial.
"I always love a surprise, especially when everybody’s eyes are on another ball, a major trial that’s happening," O’Kane remarked during the podcast. "Seemingly out of nowhere this week, SpaceX and therefore its AI subsidiary xAI — which apparently no longer exists now, or is imminently not about to exist — struck a deal with Anthropic."
Beyond the immediate business strategy, the Colossus 1 facility remains the subject of ongoing scrutiny. The site is currently the focus of an environmental lawsuit concerning the unauthorized operation of over 400 megawatts of gas turbines. These turbines, which were visible at the Memphis data center as of April 25, 2025, are alleged to be operating without the necessary environmental permits.
