xAI Accelerates Texas Data Center Expansion Amid Ongoing Energy Controversies
Claire Weston
Musk's xAI is scouting multiple Texas sites for gigawatt-scale data centers, with Q1 AI capex already at $7.7 billion — triple year-on-year — while its Memphis natural-gas reliance draws growing pushback.
Why is xAI building new data centers in Texas?
xAI currently runs two Memphis data centers with a combined capacity of roughly 1 gigawatt, housing hundreds of thousands of Nvidia GPUs.
The Texas sites target equal or larger scale. Options include ground-up builds and warehouse conversions. This means → xAI is moving from a single hub to a multi-node compute network.
Super Micro CEO Charles Liang said in June his company is helping xAI build "another brand-new gigawatt-class AI data center" within a year, without naming the location.
Where is the money coming from — and going?
xAI's Q1 AI-related capex jumped to $7.7 billion, roughly triple the year-ago quarter.
Morgan Stanley analysts project xAI will burn through $120 billion in cash from 2026 to 2027, driven mainly by infrastructure spending. In plain terms = that is about $160 million a day for two years.
To offset the outlay, xAI is leasing substantial compute to Anthropic and Google, and has agreed to acquire AI coding-tool startup Cursor for $60 billion — Cursor plans to develop a leading general-purpose model by year-end.
Who now runs xAI's infrastructure — and how fast is the team growing?
Co-founder Ross Nordeen left in March; he had overseen data-center construction and reported frequently to Musk.
A new structure landed in April: Jake Palmer leads physical infrastructure; SpaceX software-engineering director Daniel Dueri leads compute infrastructure. This means → xAI split infrastructure into hardware and software tracks, staffing each from inside and from SpaceX.
The Colossus data-center team added over 40 people in the past year and absorbed SpaceX staff after the two companies merged in February.
Why is the natural-gas strategy controversial?
xAI relies heavily on natural-gas turbines — mobile generators that burn gas — to supplement grid power at its data centers. Dozens are installed across Tennessee and Mississippi.
Memphis residents, local politicians, and environmental groups are pushing back over emissions and water use. In plain terms = the data centers consume enormous power, the gap is filled by burning gas on-site, and both the exhaust and the water draw land on local communities.
xAI postponed an $80 million wastewater-recycling facility during a cost-cutting push, sharpening the backlash.
Why does Musk keep picking Texas?
SpaceX and Tesla are jointly building a semiconductor fab near Colone in Grimes County, Texas. xAI's site selection fits the geographic clustering pattern across Musk's companies.
xAI has posted infrastructure job openings in Austin, Bastrop, and Colone, and stationed staff in Jacksonville, Florida. This reflects a multi-state push, not a Texas-only expansion.
Musk acquired power-equipment supplier APR Energy in May; it is headquartered in Jacksonville with operations in Tennessee, Mississippi, and Texas. This means → the APR deal internalizes the power supply chain, locking in energy for future data-center builds.
Content is for reference only, not financial advice.