We’re cynical about XAI’s big deal with Anthropic

Anthropic and xAI announced a major partnership this week, with Anthropic purchasing all of the computing capacity at xAI’s Colossus 1 data center in Tennessee.

In the latest episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane, and I discuss what the deal could mean for xAI’s parent company SpaceX, as SpaceX prepares to go public and apparently plans to dissolve xAI as a separate organization.

Kirsten did her best to offer a “positive outlook” on the partnership – after all, it’s a new way for xAI to make money. But she also noted that this also suggests that xAI isn’t doing much when it comes to training its leading AI models, and it’s difficult for the company to position itself as an “innovative and forward-looking” company when that’s the case.

Sean then asked: “Why be positive when you can be sarcastic?” From his perspective, this sounds like a “big pre-IPO check.” Yes, switching to a new cloud may be a “more plausible business in the near term,” but it is unlikely to excite outside investors in the long term. (Then there’s the environmental lawsuit that XAI faces over the Colossus 1.)

Keep reading for a preview of our conversation, which has been edited for length and clarity.

Sean O’Kane: I always love a surprise, especially when it’s in everyone’s eyes [are] On the other hand, there is a major experiment. Apparently, this week, SpaceX, and by extension its artificial intelligence company xAI — which now apparently no longer exists, or isn’t even close to existing, which is as far as we can tell — struck a deal with Anthropic.

Basically, the real version of the deal is that Anthropic is essentially taking over all of the computing at the data center known as Colossus 1 in Memphis, Tennessee, to focus on Anthropic’s more enterprise-focused AI products. There have been a lot of reports about how [Anthropic’s] More account was sought […] And this seems to be an escape valve for them so they can make this deal and get access to all this computing.

In the near term, for xAI and SpaceX, yes, they’re the new cloud now, in the sense that they had to do something with all this computing they were building, because it certainly seemed like they wouldn’t need it for Grok — which, outside of X, isn’t burning the world so much as becoming the new consumer chatbot.

Kirsten Korosek: And we have to say that in terms of what the new cloud is, for those who don’t know, this is the idea of ​​buying GPUs from Nvidia and the like, and leasing them instead of using them for their own AI, and training their own AI models.

So, this is a different kind of business, and the point that our AI editor, Russell Brandom, made is that a lot of companies are building data centers, but given a choice, would you lease them? [or using them to train their own models]they are still prioritizing the use of this account for internal training of their AI model. I think this is an important point and suggests that XAI may not be doing much in training the AI ​​model [side]

Anthony Ha: Granted, as Sean alluded to, most people don’t necessarily think of Grok – not only is he known for some unpleasant, if not outright illegal, content, but he’s also not necessarily very sophisticated. Especially if we start talking about enterprise AI, which I know we’ll get to later in this episode, you’re not going to hear a lot about people using Grok for business-critical tasks.

So the question becomes: How can xAI actually make money? Obviously, simply selling infrastructure could be one of the main ways to do this.

Kirsten: And you can take a positive view of that, right? They’ve figured out a way to make money. But I think when you position your company — in this case, SpaceX-slash-xAI — as a forward-looking, innovative company, it’s a hard sell if you’re simply leasing your GPUs and not using them for that innovation.

Shawn: But why be positive when you can be sarcastic? That means this looks like a big heat check ahead of the IPO that we’re about to see SpaceX bring to market.

Anthony, you mentioned that not only was Grok being used for large enterprise tasks, but there were reports that xAI employees were using other models, and they weren’t even using [Grok] Internally, this has caused a major change within XAI, following the acquisition from SpaceX, which essentially involved the departure of all co-founders other than Elon Musk, [and] He’s basically saying he’s starting from scratch on xAI, despite the fact that SpaceX paid $250 billion for it in the run-up to this massive IPO.

Now he says they will dissolve xAI as a separate entity within SpaceX entirely. He started calling the whole thing SpaceXAI, because this guy loves nothing more than to destroy a brand that has some value – see Twitter.

This might be a more believable business in the near term, and so on some level, I can see this being perhaps more attractive to investors at IPO time, because it’s a little more reliable and certainly more realistic than being a frontier lab developer. But it’s also not the kind of business that would attract the same kind of — at least, in a normal setting — outside investment that we’re seeing going into all the frontier labs.

This is probably one of the biggest points of tension we’ve seen develop during the IPO process.