Recently, xAI announced that it is developing a supercomputer called Colossus2, aiming to surpass the computing power of Meta and Anthropic in the third quarter of 2025. According to a report by Semianalysis, the launch of this system will put xAI ahead of these competitors in raw computing power. However, the report also points out that even with Colossus2, the gap between xAI and OpenAI remains significant, with the latter expected to maintain its leading position.

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Image source note: The image is AI-generated, and the licensing service provider is Midjourney.

The construction of Colossus2 began in March 2025, when xAI purchased a warehouse of nearly one million square feet in Memphis, Tennessee. In just six months, xAI successfully installed approximately 200 megawatts of cooling capacity, sufficient to support about 110,000 Nvidia GB200NVL72 systems. To address local resistance to gas turbines in Memphis, xAI relocated its power facilities to Southaven, Mississippi, acquiring a former Duke Energy power plant and obtaining a 12-month temporary operating permit. Electricity will be delivered to Memphis through newly built medium-voltage lines and Tesla Megapack energy storage systems.

In terms of long-term expansion, xAI is collaborating with Solaris, a publicly listed energy infrastructure company. Solaris stated that xAI has secured 1,140 megawatts of electricity from its project pipeline, with part of it through a joint venture where Solaris holds 50.1% and xAI holds 49.9%. It is expected that over 1.1 gigawatts of turbine power generation capacity will be operational by the second quarter of 2027.

The cost of Colossus2 is described as "billions of dollars." Due to xAI's limited external revenue, primarily transferred internally via X.com, the project may need external funding. The report notes that Musk's close ties with Middle Eastern investors, including sovereign wealth funds from Saudi Arabia, the UAE, and Qatar, could provide support for this project.

Despite massive investments in hardware, xAI still faces many challenges. Semianalysis pointed out that while xAI has strong research talent, high employee turnover due to Musk's "strict" work culture, with working hours often reaching 12 hours a day, seven days a week. Additionally, xAI's business model appears unstable. Although Grok4API is competitively priced, it performs weakly, especially in programming capabilities, leading to low enterprise adoption. Even consumer demand, initially boosted by tight integration with X, has now begun to level off.

Key Points:

1️⃣ xAI plans to surpass Meta and Anthropic with Colossus2 in 2025, but still cannot catch up with OpenAI.  

2️⃣ The construction of Colossus2 relies on newly acquired power facilities, and it is expected to achieve greater power generation capacity by 2027.  

3️⃣ The project is costly, and xAI may rely on funding from Middle Eastern investors, while facing challenges such as high employee turnover and low enterprise adoption.