Musk leaves Memphis high and dry

xAI is draining millions of gallons from the Memphis drinking water supply. Musk's promised fix has been delayed indefinitely.

xAI, Elon Musk’s artificial intelligence company, has repeatedly boasted about the speed at which it has erected its sprawling data centers in Memphis, Tennessee. On its website, the company claims it took only four months to build the Colossus 1 data center, despite initial estimates that the project would take two years. xAI said it accomplished this feat by questioning “everything” and removing “whatever was unnecessary.”

Now, as xAI attempts to replicate that breakneck pace to construct the Colossus 2 data center in Memphis, it has identified another unnecessary inefficiency: a water recycling plant that the company had promised to build for the community to help offset the millions of gallons of local drinking water that xAI’s facilities exhaust every day.

xAI, which uses freshwater from the Memphis Sand Aquifer to cool its data centers and accompanying power plants, had originally committed to building the water-reuse facility in 2024. But after nearly two years, Musk posted on X this month that the project would be paused indefinitely as xAI prioritizes adding more computing power to upgrade the Grok large language models. “We need to focus on finishing Colossus 2 and ensuring it is extremely stable, then will build the water recycling plant,” wrote the centibillionaire, who has not provided a new timeline for the plant.

KeShaun Pearson, the executive director of Memphis Community Against Pollution and vice chairman of Protect Our Aquifer, was not surprised. “This project has been able to move fast and break things,” Pearson said in an interview. “These folks prop up these projects using a lot of hyperbolic language. They make huge, outlandish promises, and they continue to fail people across the country.”

xAI did not immediately respond to a request for comment.

“We’ve been scammed”

As part of its early charm offensive in Memphis, xAI promised in June 2024 to spend $78 million to build a water-recycling plant that would treat a portion of municipal wastewater, making it usable for industrial cooling applications. The company and allied local officials held up the proposal as proof that xAI’s data centers would be socially responsible and environmentally sustainable. Then, last year, xAI purchased land from the city of Memphis for the plant and began installing pipes and a pair of water storage tanks. But with xAI losing billions of dollars — including a reported $1.46 billion in losses for the third quarter of 2025 — its plans have changed. A construction manager for xAI told the Daily Memphian recently that the water recycling project had gone over budget and that parts of the construction site had been shut down with no indication that work would resume.

Purported money problems have not limited xAI’s ambitions in other areas. In late December, xAI purchased an 800,000-square-foot warehouse in Mississippi’s DeSoto County, where it plans to build a third data center. xAI will invest $20 billion in the site, located a few hundred feet outside the Memphis boundary, according to Tate Reeves, the Republican governor of Mississippi. xAI was also recently acquired by SpaceX, and the combined company is looking to raise $75 billion in June as part of a $2 trillion initial public offering.

Even if xAI eventually builds the recycling plant, it would not offset all the water consumed by its data centers, particularly as sites are added and expanded. The Colossus 2 and 3 facilities, for instance, will not use any water from the recycling plant; instead, they will draw exclusively from the aquifer.

“We’ve been scammed,” said Pearson. “What we’re looking at is two years of xAI growing and consistently using the water from the Memphis Sand Aquifer at very cheap prices in order to power this machine that is disintegrating the amount of water our future generations will have.”

In addition to its multiple data center sites, xAI operates a large power plant in DeSoto County that consumes roughly 500,000 gallons of freshwater per day for cooling, according to Protect Our Aquifer executive director Sarah Houston. “All said and done, we’re expecting the four [xAI] facilities to use upwards of 10 million gallons a day once everything’s online,” Houston said in an interview. “Which would put them in pretty much the top — if not second place — water user in the entire region.”

The vast majority of the water used to cool xAI’s data centers and power plants is lost to evaporation. “They’re extracting from this pure, deep aquifer that is our drinking water supply, and it’s getting heated up to such a degree that it gets released as steam, and it’s gone,” said Houston. “That’s one of the big things about these data centers, too, they really remove the water from the local cycle.”

“They are developing asthma”

Along with its vast consumption of drinking water, the scores of methane gas-burning turbines that xAI relies on to power its data centers around Memphis emit dangerous amounts of smog-forming nitrogen oxides, carbon monoxide, and formaldehyde. Last week, the NAACP filed a lawsuit against xAI in the Northern District of Mississippi for illegally operating 27 methane-burning turbines to power the Colossus 2 data center.

The NAACP had issued a 60-day intent-to-sue notice before filing the lawsuit. But xAI opted to continue operating the allegedly illegal power plant, which is positioned approximately 2,000 feet from a church, a park, and a large neighborhood with an elementary school.

“In the last 12 months, multiple people who’ve attended our meetings have told us that they are developing asthma,” Pearsons said. “Two of the folks had moved back to Memphis in the last two years and developed asthma because of their proximity to this pollution. One of our community members had an asthma attack for the first time in a decade.”

Last year, xAI was operating 35 gas-burning turbines without a permit to power its Colossus 1 site, which is located in Boxtown, a historic Black neighborhood in Memphis that already faces extremely high rates of cancer and respiratory illness from decades of industrial pollution. However, instead of facing consequences for its public health violations, the Shelby County Health Department awarded xAI a five-year permit to operate 15 turbines.