Musk's xAI Aims For 1 Million GPUs In Memphis—But Can The City's Grid Handle A $27B AI Power Surge?

Elon Musk is once again making headlines, this time with his AI startup xAI and its massive computing ambitions in Memphis, Tennessee. With plans to install one million Nvidia NVDA graphics processing units, Musk wants to turn the city into a global AI powerhouse.

But there’s just one small problem—power, lots of it. And Memphis’s grid might not be ready for the jolt.

A Supercomputer Dream Faces a Power Reality Check

Since June 2024, xAI has filed 14 construction permit applications totaling an estimated $405.9 million. These permits cover everything from a $30 million computer equipment installation to a $3.9 million crash-resistant perimeter fence, according to Business Insider. But powering this supercomputer isn’t as simple as flipping a switch.

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Musk’s company has requested 300 megawatts from Memphis Light, Gas and Water, or MLGW. Still, it has only secured approval for 150 megawatts so far, according to a Nov. 7 meeting report by the Tennessee Valley Authority board of directors. That’s not nearly enough to keep 1 million graphics processing units humming.

To make up for this, xAI has applied to build an electrical substation, which uses gas-powered generators from Caterpillar CAT subsidiary Solar Turbines, which can produce a combined 250 megawatts. Still, this falls short of the massive energy needs ahead.

In a TED Talk, electrical and computer engineering professor at the University of California Riverside Shaolei Ren, said, “Every time you ask an AI chatbot a question, you also consume water—without realizing it. AI doesn’t just require computing power; it needs cooling, and that cooling comes with a cost.”

According to the study, "Making AI Less ‘Thirsty': Uncovering and Addressing the Secret Water Footprint of AI Models," which Ren was the corresponding author of, training the GPT-3 language model in Microsoft’s MSFT state-of-the-art U.S. data centers can directly evaporate 700,000 liters of clean freshwater.

Despite the challenges, Memphis officials are eager to see the project succeed. They’ve called xAI’s investment a game-changer that could establish the city as a global AI hub. In an Oct. 5, WMC-TV board meeting, Edge CEO Joann Massey said, “This is a phenomenal event that just happened in Memphis. This is the catalyst for growth, for moving our city forward, and a big investment. We all expect to see great things happening.” However, the power concerns are very real.

On Jan. 8, MLGW CEO Doug McGowen acknowledged the potential roadblocks during a public meeting of the Memphis City Council, stating, "People can announce many things, and I think that’s important for our community—that we get excited about upcoming opportunities. But as you know, there are pragmatic realities about a lot of things."

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