SpaceX Pivots xAI Unit to Cloud Provider, Racing to Expand Compute Capacity for Major Customers

Elon Musk has shifted strategy dramatically on AI infrastructure, transforming xAI from a standalone AI company into a lucrative cloud computing provider for rival AI firms—a move that contradicts his earlier reluctance to enter the cloud services business. Following SpaceX's acquisition of xAI in February 2026, the combined company has begun aggressively leasing compute capacity from data centers originally built to train xAI's own AI models. The company now operates the Colossus cluster, a sprawling 2.6-million-square-foot facility across Tennessee and Mississippi housing roughly 770,000 GPUs and generating 1.4 gigawatts of compute capacity as of mid-2026.