The SpaceX IPO prospectus touts the speed of xAI's data center construction as a selling point: Macrohard, the second data center in Memphis, had its first chip cluster online in 91 days — industry standard is two years. The first two clusters cost $2.7 million per megawatt, roughly a quarter of the industry benchmark. The secret to saving time? Retrofitting old factories. The secret to saving money? Mobile gas turbines, Tesla Megapacks, and over 100 mobile chillers to fill the gap while waiting for permanent grid connections.
But the cost of those temporary fixes is already showing. Macrohard's uptime is far below the internal target of 99.9%, and outages have repeatedly interrupted model training. In an internal memo, Michael Nicolls, the Starlink SVP who took over xAI's infrastructure, wrote bluntly that the Model FLOP Utilization (MFU) of hundreds of thousands of Nvidia GPUs was just 11% — "embarrassingly low" — and demanded it be raised to 50% within months. Meanwhile, SpaceX and xAI combined lost about $5 billion in 2025, and xAI's nearly $13 billion in capital expenditures was 50% higher than SpaceX's own spending on rockets and satellites.
That context makes today's deal — Anthropic renting the entire Colossus 1 cluster — particularly interesting. xAI's public explanation is that training has moved to the larger Colossus 2, so it's renting out all 220,000-plus GPUs in Colossus 1. But with MFU at 11%, it's clear xAI wasn't using its own chips effectively; better to turn them into cash instead of burning electricity. Under the pressure of $13 billion in capex and $5 billion in losses, the rental income provides real cash flow. It also helps the IPO narrative: if even a competitor rents our compute, it proves the infrastructure has value and can be booked as revenue.
The operational costs go beyond outages. Several executives overseeing Macrohard and Colossus construction have left in recent weeks. An $80 million greywater recycling plant has been indefinitely paused. Worker safety is also a concern: in January, a worker had a finger amputated; in September, two employees of a contractor were electrocuted, with one hospitalized for 53 days.