Elon Musk’s ambitions for artificial intelligence are coming together in a former vacuum-cleaner factory in Memphis, Tennessee. It houses a data center known as Colossus 1, containing racks of servers spanning an area more than 13 football fields in size and chugging 300 megawatts of electricity at any given moment (enough for hundreds of thousands of homes). As of this month, those computers will be powering Claude, the chatbot created by Musk’s new frenemy, Anthropic PBC.
The Tesla Inc. billionaire was in a very different headspace in February, when he called Anthropic an “evil” AI lab that hated Western civilization. But it’s become clear that Musk’s AI model, Grok, doesn’t have hope of competing with either Claude or OpenAI’s ChatGPT. The former is on track to bring in $40 billion in revenue, mostly from the lucrative business of selling to companies; Grok barely registers in IT department spending anywhere.
Hence Musk changed his tune last week. "Claude is good for humanity,” he posted on X after meeting Anthropic management. “No one set off my evil detector." Musk’s moral epiphany hit just when Anthropic went from competitor to potential customer. Claude’s success has made Anthropic desperate for the racks of computers that were sitting idle in Colossus 1; although the data center was built to train and run Grok, weak demand meant the chatbot was only using 11% of its computing power.
Leasing computers for AI offers much better margins than selling AI directly. Though financial terms for the Anthropic deal weren’t disclosed, estimatessuggest Musk’s new tenant could contribute between $3 billion and $5 billion in annual revenue for SpaceX, which operates the Memphis data center.And there could be more money to make from Colossus 2, Musk’s new facility in Mississippi that should harness nearly five times the power of its predecessor.
The billionaire’s efforts in building software have always been hit and miss. X , the platform formerly know as Twitter, has lost advertisers and users since he took it over; Tesla’s self-driving technology has consistently underdelivered. Grok itself has lagged behind other AI models in capability benchmarks, capturing just 3% of market share for chatbot web traffic versus 65% for ChatGPT and 22% for Google’s Gemini, according to market intelligence firm SimilarWeb. “The model fight is one that xAI is not well-suited for, temperamentally and economically,” analyst Ben Thompson recently wrote on his blog Stratechery.
Musk has a much stronger footing in building physical systems: Starlink is the largest satellite constellation ever created, while Tesla operates the world’s biggest fast-charging network with more than 75,000 electrical stations globally. In building data centers, Musk’s knack for infrastructure has helped him skirt issues that bedeviled other hyperscalers. The likes of Alphabet Inc.’s Google and Amazon.com Inc. have faced delays in their computing build-out thanks to bottlenecks in power and equipment, with nearly half of planned facilities in the US for 2026 facing delays or cancellations. Such projects often take two years or more to build and suffer from chronic limits in the US power grid.
