xAI, Elon Musk’s AI company, is planning a massive new supercomputer called Colossus 2 that would push it past rivals like Meta and Anthropic in raw compute power. But according to a Semianalysis report, even this unprecedented system wouldn’t close the gap with OpenAI, which is still projected to lead by a wide margin.
Semianalysis estimates Colossus 2 will surpass Meta and Anthropic’s compute capacity by the third quarter of 2025. xAI has already secured the necessary GPU allocations from Nvidia. Still, their analysis shows OpenAI’s total available compute staying well ahead.
A gigawatt datacenter built in record time
Work on Colossus 2 began on March 7, 2025, when xAI acquired a nearly 1 million-square-foot warehouse in Memphis, Tennessee. Within six months, the company had reportedly installed cooling capacity for about 200 megawatts—enough to run roughly 110,000 Nvidia GB200 NVL72 systems, according to SemiAnalysis.
To sidestep local resistance to gas turbines in Memphis, xAI shifted its power generation across the state line. In mid-2025, it purchased a former Duke Energy plant in Southaven, Mississippi. Regulators there granted provisional approval to operate gas turbines for up to 12 months without a full permit. The power would be fed to Memphis via new medium-voltage lines and Tesla Megapack storage systems.
For long-term scaling, xAI is working with the publicly traded Solaris Energy Infrastructure. The company says xAI has already claimed 1,140 megawatts from Solaris’s project pipeline, part of it through a joint venture where Solaris holds 50.1 percent and xAI 49.9 percent. By the second quarter of 2027, more than 1.1 gigawatts of turbine capacity is expected to be online.
Who pays for it?
The cost of Colossus 2 is described as "tens of billions of dollars." Since xAI generates little external revenue and most of its reported income comes through internal transfers with X.com, the project will likely depend on outside capital. The report points to Musk’s close ties with investors in the Middle East, including sovereign wealth funds in Saudi Arabia, the UAE, and Qatar.
Despite the huge hardware push, xAI faces steep challenges. Semianalysis highlights strong research talent but also high turnover tied to Musk’s "hardcore" work culture, with 12-hour days and seven-day weeks.
The business side looks shaky as well, the report points out. xAI’s API, Grok 4, is priced competitively with rivals like Claude Sonnet 4 but offers weaker performance, especially in coding. Enterprise adoption has been low, held back by public mishaps such as the notorious "MechaHitler" incident and broader concerns about Musk’s influence on model behavior. Even consumer demand—boosted at first by tight integration with X—has started showing flattening growth.
