SpaceX rents Colossus 1 after latency issues derail Grok AI training plans

SpaceX reportedly rented out Colossus 1 AI data center after it ran into latency issues.

While SpaceX plans satellite-based AI servers, Bloomberg reports it ran into trouble trying to develop and run Grok AI in Memphis, citing unnamed sources. They claim that deals renting capacity to Anthropic ($15 billion annually) and Google ($920 million per month) happened following hardware variation and lag issues: Elon Musk's company had planned to train its most cutting-edge AI models on a massive amount of computing power by using a cluster of three data center campuses. However, the firm encountered latency issues when connecting Colossus 1 with two other sites located more than 10 miles away, the people said, compounded by aging network infrastructure.

SpaceX rented Colossus 1 to Anthropic because it couldn't make the data centre work for Grok

SpaceX rented Colossus 1 to Anthropic after hitting latency and chip mismatch issues trying to use it for Grok. The newer facilities use uniform Blackwell chips. SpaceX rented its Colossus 1 data centre to Anthropic not because it had surplus capacity, but because it could not make the facility work for its own AI models. Bloomberg reported on Friday that SpaceX encountered latency issues when trying to connect the Memphis site to two other data centre campuses located more than 10 miles away, compounded by aging network infrastructure. The company had planned to train its most cutting-edge Grok models using a cluster of three facilities working together. Training large AI models requires ultra-fast connections between sites. If the links are older or lower bandwidth, they create delays that slow the entire cluster. SpaceX determined the facility would be more valuable generating revenue than sitting underutilised. The hardware mismatch made things worse. Colossus 1 contains a mix of Nvidia chip generations, including Hopper and Blackwell systems alongside older accelerators. Colossus 2 and 3 were built more uniformly around Nvidia's Blackwell chips. In a distributed training cluster, the workload is spread across machines that need to stay synchronised. Older chips create bottlenecks by forcing faster accelerators to wait. The cluster ends up performing closer to its slowest hardware, not its fastest. The result is that Anthropic is now paying $1.25 billion per month to use a facility that SpaceX's own engineers could not fully utilise. Combined with the $920 million monthly Google deal, SpaceX is collecting approximately $2.17 billion per month in compute revenue from infrastructure it originally built for itself. The revelation complicates the narrative SpaceX presented during its IPO roadshow. Musk's company repeatedly stressed that Colossus 1 was built in just 122 days, exceeding industry averages. Speed of construction was a selling point. Bloomberg's reporting suggests speed came at a cost: the facility was not built uniformly enough to serve as part of a larger training cluster. SpaceX CFO Bret Johnsen said the company has not given up on internal AI services, including Grok. Musk has described the Anthropic arrangement as a 180-day lease with a 90-day mutual cancellation right, preserving the option to reclaim the capacity. "If compute gets super tight I said we might need it back at some point," he said. But Grok's trajectory makes reclaiming the compute less urgent. Downloads fell from 20 million in January to 8.3 million in April. Paid conversion is a fifth of ChatGPT's. Federal adoption has stalled. The product that was supposed to justify the data centre investment is underperforming, while the rental income from Anthropic and Google is now a $26 billion annualised revenue line. SpaceX built a data centre for AI training and accidentally became an AI landlord instead.