Elon Musk is no longer competing with OpenAI and Anthropic for the best model. He’s building the power grid their ambitions require.
Musk’s xAI and SpaceX are leasing the ‘Colossus 1’ data center - a 300-megawatt facility with 220,000 Nvidia H100 GPUs - to Anthropic. On All-In, David Sacks framed the deal as the birth of “Elon Web Services,” a direct infrastructure rival to AWS and Azure that generates immediate billions to fund Musk’s own Grok models. For Musk, it’s an admission that building frontier models is a different skill set than building massive hardware.
“This move provides 220,000 Nvidia GPUs and 300 megawatts of power. It also marks the birth of Elon Web Services (EWS).”
- All-In podcast
Anthropic was starving for capacity. The AI Daily Brief’s Nathaniel Whittemore noted the company had the best-in-class coding model but couldn't run it reliably, throttling user tokens and pausing research. This lease doubles Claude Pro rate limits overnight. It resolves a mutual crisis: Musk had unmatched hardware but a stalled model and a dwindling team.
With its compute constraint broken, Anthropic is shifting focus from raw model releases to building an agentic ecosystem. At its recent ‘Code with Claude’ event, the company unveiled ‘Managed Agents’ with features like Dreaming, which lets agents review their own sessions to improve over time, and Outcomes, which uses a separate grading agent to audit work against user-defined rubrics. Boris Cherny, creator of Claude Code, said manual coding has effectively disappeared within Anthropic’s own teams.
The financial scale of this infrastructure arms race is staggering. On FYI, Frank Downing outlined the math: a one-gigawatt data center costs roughly $60 billion - $20 billion for land and power, plus $40 billion for the IT stack and GPUs. If used by the model builder itself, that capacity can drive $30 billion in annual revenue, offering a two-year payback.
“If rented out as infrastructure-as-a-service, a gigawatt generates roughly $15 billion per year. If used by the model builder itself, like OpenAI or Anthropic, that same capacity can drive $30 billion in annual revenue.”
- Frank Downing, FYI podcast
That payoff is why the hunt for power is going orbital. As terrestrial sites grow scarce, SpaceX plans to use Starship to launch modular AI clusters into space. Brett Winton expects this shift to begin around 2028. At $300 per kilogram launch costs, deploying a gigawatt in space could cost $7.5 billion, undercutting the $20 billion terrestrial infrastructure price tag. For companies like Anthropic, getting hardware online fast is more valuable than saving marginal costs later.
The deal crystallizes a new hierarchy: the companies that control the electrons will ultimately govern the tokens.
