Musk’s Memphis AI empire is the epicenter of the data center backlash

Two years after Elon Musk made Greater Memphis the center of his AI ambitions, building out data centers and energy infrastructure at breakneck speed, residents are grappling with unintended impacts, including noise and emissions from natural gas-powered turbines.

Now, Public opposition to the SpaceXAI sites known as Colossus and Colossus II provides a blueprint for other communities across the country opposing artificial intelligence developments.

This week, New York Governor Kathy Hochul enacted a one-year moratorium on the construction of AI data centers in her state, drawing the ire of Musk ally US President Donald Trump.

Last week, New Jersey Governor Mikie Sherrill introduced a law that would make data center operators pay a fair share for electricity, rather than shifting costs to residents and businesses.

Other policy proposals, protests and lawsuits are underway, many of which directly reference SpaceXAI, which was acquired by Memphis and Musk’s defense contractor. SpaceXIn February.

“When you think about the precedent Colossus set, it’s not a very good example,” said Jigar Shah, a former director of the U.S. Department of Energy’s loan program office and a longtime energy entrepreneur. “This is certainly a case study in much of the rest of the country of what not to do. But from a capitalist perspective, they’ve been rewarded.”

In June, SpaceX held a record-breaking IPO, with artificial intelligence and the Colossus I and II facilities at the center of its growth story.

Google, Anthropic and Reflection AI signed deals with SpaceX to lease excess computing capacity on Colossus and Colossus II; these deals are worth up to $2.32 billion per month.

Residents don’t feel the same benefits. Many told CNBC that SpaceXAI never consulted them about its plans before breaking ground, even though it was clear that the data centers would profoundly impact nearby neighborhoods.

Jason Haley of Southaven, Miss., whose home is within a mile of the site, said today that the noise from Colossus II and its gas-burning turbines “sounds like some kind of torture.” Southaven is part of the Greater Memphis area.

Opposition to data centers is growing, and not just against xAI, but also in response to planned or ongoing developments. Microsoft, Meta, Google, OpenAI and other so-called hyperscalers.

According to a Gallup poll in May, seven in 10 Americans said they opposed building data centers for artificial intelligence in their area. Almost half, or 48%, said they were. He strongly objected.

Even Musk has admitted that he doesn’t like the public operating AI data centers and power plants.

“There are very few people who want a power plant in their backyard,” Musk said. JPMorgan CEO Jamie Dimon on a promotional tour ahead of SpaceX’s IPO. “If we wanted to double the United States’ electricity use,” he said, “we would have to build twice as many power plants. Most communities are not very excited about that.”

Musk and SpaceX did not respond to multiple requests for comment about the backlash to their construction in Memphis.

SpaceXAI purchased more than 1,100 acres of land in Greater Memphis for its data centers and power plant.

The data centers were initially built to train and run xAI’s Grok AI models and its controversial chatbot.

Data centers have been around for decades, but the building boom began after generative AI triggered an explosion in data processing and power needs. Facilities often require large areas of land, energy to power the chips and servers inside, and water to cool high-tech equipment.

For all their complexity, data centers, once built, do not require a large workforce for operations and do not always create many new jobs or large amounts of tax revenue.

Memphis residents and climate advocates are sharing their experience as a cautionary tale, using lessons learned to help other communities reach updated regulations or more favorable agreements with data center developers.

Their testimonies directly and indirectly influenced policies, causes, elections, and movements that took shape beyond Memphis.

Communities in nearby Olive Branch and Jackson, for example, updated their zoning laws, citing a desire to avoid the pitfalls that Memphis residents faced when Musk moved to the city.

In June, Utah state Senate president Stuart Adams lost the Republican primary after backing a data center proposal backed by investor Kevin O’Leary. Two other local officials who supported the project also lost in primaries.

In a post dated September 2, 2024, Musk announced the closure of the data center, saying that the Colossus I data center was completed in just 122 days. brought online.

Memphis Mayor Paul Young, who helped bring the data center business to the county, said SpaceXAI paid $25 million in taxes during its first year of operation, making it the second-largest tax-paying property in Shelby County after FedEx.

“Since this project began, we have been looking at how to reduce potential negative impacts and increase positive impacts,” Young said. He acknowledged that SpaceX has yet to deliver on everything it has promised, such as delaying construction of a water recycling facility aimed at reducing the company’s energy needs. large amounts of water To cool the equipment on the Colossus.

Residents living around Greater Memphis told CNBC that their water and electricity bills increased after SpaceXAI moved into the city.

Memphis Light Gas & Water said its water and electricity rates were “unaffected” by SpaceXAI.

“The 4 percent electricity rate increase plan for 3 years starting in 2024 is not due to any data center load,” a spokesperson for the utility told CNBC in an emailed statement.

Last year, Haley joined a neighborhood group called The. Safe and Sound Coalitiontaking noise measurements, raising awareness, and encouraging company and municipal leaders to make changes.

In March, Southaven Mayor Darren Musselwhite vowed to “increase tougher enforcement” against noise but told Haley “you may want to consider selling your house” in emails read by CNBC.

Musselwhite said in an email to CNBC on Thursday that he “worked countless hours to alleviate noise concerns” and “never told a citizen to move.”

Haley and other Southaven residents have sued SpaceX in a proposed lawsuit. class action lawsuit A lawsuit was filed in June this year, alleging that the company was “disturbing the public” with the noise of Colossus II.

Following in their footsteps, Microsoft’s Mt. Neighbors of the Fairwater Data Center in Pleasant, Wisconsin, also filed a proposed class action lawsuit this month over noise issues.

In April, the Southern Environmental Law Center and Earthjustice sued Musk’s company on behalf of the NAACP in a federal court in Mississippi. They allege the company violated the federal Clean Air Act by using dozens of gas-burning turbines to power its facilities without proper permits and pollution controls.

The types of SpaceXAI turbines used in Memphis can emit thousands of tons per year of smog-forming nitrogen oxides, according to manufacturers’ specifications. SpaceXAI also emits particulate matter called “PM 2.5” or “particle pollution” due to construction and operations.

Lawyers for the NAACP asked a judge in May to issue an emergency injunction to stop SpaceX from using dozens of turbines in Southaven. The US Department of Justice quickly stepped in and asked the court to dismiss the case.

As part of its intervention request last month, the Justice Department said SpaceXAI technology had been used in American military operations in Iran and was now vital to national security. They also argued that the lawsuit “threatens” America’s national, economic and energy security.

SpaceX is defending against the NAACP lawsuit by arguing that the turbines currently on site are only temporary and that plans exist for permitted turbines with pollution control.

The NAACP issued a guide for communities In January, they’ll have a look at how to protect themselves from “dirty data.” frame companies can follow To avoid conflicts with neighbors like the one SpaceXAI experienced in Memphis.

Attorney Abre’ Conner, who leads the NAACP Center for Environmental and Climate Justice, said SpaceXAI and other companies moving into areas already exposed to industrial pollution are “deepening the zones of sacrifice that many of these community members have long struggled to get out of.”

Loretta Thornton, a longtime resident of Whitehaven, Tennessee, where the majority of residents are black, said she invested some of her retirement and savings to rebuild the frame of her home surrounding the fence line of Colossus II.

He said the selling and moving proposals don’t seem viable, especially considering housing costs and interest rates are rising.

“You just have to put up with it. That’s what I do,” Thornton said. “I know I can’t sell my property. Who living next to this thing wants to buy it?”

— CNBC producer Andrew Evers contributed reporting.