Two years after Elon Musk made Greater Memphis the center of his artificial intelligence ambitions, building data centers and energy infrastructure at breakneck speed, residents are grappling with unwanted effects, including noise and emissions from the natural gas-burning turbines.
Now, public opposition to the SpaceXAI sites, known as Colossus and Colossus II, is providing a blueprint for other communities across the country opposed to AI developments.
This week, New York Gov. Kathy Hochul enacted a one-year moratorium on the construction of AI data centers in her state, drawing the ire of U.S. President Donald Trump, an ally of Musk.
And last week, New Jersey Gov. Mikie Sherrill enacted legislation to ensure data center operators pay a fair share for electricity, instead of shifting costs to residents and businesses.
Other policy proposals, protests and litigation are underway, many directly citing Memphis and SpaceXAI, which was acquired by Musk’s defense contractor, SpaceX, in February.
“When you think about what precedent Colossus has set, it hasn’t been a great one,” said Jigar Shah, the former director of the U.S. Department of Energy loan program office, and a long-time energy entrepreneur. “It certainly is a case study for what not to do in most of the rest of the country. But from a capitalist standpoint, they got rewarded.”
Southaven, Mississippi resident Jason Haley is part of a class action lawsuit against SpaceX due to power plant noise.
In June, SpaceX pulled off a record-setting IPO, with AI and its Colossus I and II facilities at the heart of its growth narrative.
Google, Anthropic and Reflection AI have all inked agreements with SpaceX to rent excess computing capacity at Colossus and Colossus II, deals worth up to $2.32 billion per month.
Residents don’t feel the same benefits. Several told CNBC that SpaceXAI never consulted with them about their plans before they broke ground, though it was clear the data centers would profoundly impact nearby neighborhoods.
Today, the noise from Colossus II and its gas-burning turbines is “like a form of torture,” said Jason Haley of Southaven, Miss., whose house is within a mile of the site. Southaven is part of the Greater Memphis area.
Opposition rising
Opposition to data centers is rising, and not just against xAI, but also in response to developments planned or underway from Microsoft, Meta, Google, OpenAI and other so-called hyperscalers.
In May, seven in 10 Americans said they oppose the construction of data centers for AI in their local area, according to a Gallup poll. Nearly half, or 48%, said they were strongly opposed.
Even Musk has acknowledged the public distaste for AI data centers and power plants to run them.
“There are very few people who want a power plant in their backyard,” Musk said in an interview with JPMorgan CEO Jamie Dimon in the road show ahead of SpaceX’s IPO. “If we wanted to, say, double the electricity usage of the United States,” he said, “we would have to build twice as many power plants. Most communities are not super excited about that.”
Musk and SpaceX did not respond to multiple requests for comment about the backlash to their buildout in Memphis.
SpaceX is building a massive gas turbine power plant in Southaven, Mississippi to power its data centers in the area.
SpaceXAI has purchased over 1,100 acres 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 chatbot, which was steeped in controversy.
Data centers have been around for decades, but a building boom started after generative AI triggered an explosion in the need for data processing and power. The facilities typically require vast plots of land, energy to power the chips and servers inside, and water to cool high-tech equipment.
For all their complexity, once built, data centers don’t require a large workforce for operations, and don’t always generate a huge number of new jobs or vast amounts of tax revenue.
Memphis residents and climate advocates are sharing their experiences as a cautionary tale, using lessons learned to help other communities push for updated regulations, or more favorable deals with data center developers.
Their testimonies have directly and indirectly influenced policies, lawsuits, elections and movements taking shape beyond Memphis.
Communities in nearby Olive Branch and Jackson, for example, updated their zoning laws, citing a wish to avoid the pitfalls Memphis residents faced when Musk moved to town.
In June, Utah state Senate president Stuart Adams lost in the Republican primary after he supported a proposed data center backed by investor Kevin O’Leary. Two other local officials who backed the project also lost in primary elections.
Whitehaven, Tennessee resident Loretta Thornton’s home is right next to xAI’s Colossus 2.
Musk’s Colossus I data center was completed in just 122 days, he said in a post on Sept. 2, 2024, announcing that the data center had been brought online.
During its first year in operation, SpaceXAI paid $25 million in taxes, making it the second largest tax-paying property in Shelby County after FedEx, said Memphis Mayor Paul Young, who helped bring the data center business to the county.
“Ever since this project began, we were looking at how to mitigate the potential negative impacts and how to amplify the positives,” Young said. He acknowledged that SpaceX has not yet delivered everything it promised, such as the delayed construction of a water recycling plant meant to reduce the company’s need for huge amounts of water to cool equipment at Colossus.
Residents around Greater Memphis told CNBC their water and electricity bills have gone up after SpaceXAI moved to town.
Memphis Light Gas & Water said that water and electricity rates “have not been impacted” by SpaceXAI.
An “electric rate increase plan of 4% for 3 years beginning in 2024 was not due to any data center load,” a spokesperson for the utility told CNBC via email.
Legal battles
Last year, Haley joined a neighborhood group called the Safe and Sound Coalition, to take noise measurements, raise awareness and push the company and municipal leaders to make changes.
In March, Southaven Mayor Darren Musselwhite pledged to “step-up tougher enforcement” on the noise but told Haley, in e-mails read by CNBC, “you may want to consider selling your home.”
Musselwhite told CNBC in an email on Thursday that he has “worked countless hours to mitigate noise concerns,” and “never told a citizen to move.”
SpaceXAI’s Colossus data center in Memphis, Tennessee on June 17, 2026.
Andrew Evers, CNBC
Haley and other Southaven residents sued SpaceX in a proposed class action lawsuit filed in June this year, alleging the company created a “public nuisance” with noise from Colossus II.
Following in their footsteps, neighbors to Microsoft’s Fairwater Data Center in Mt. Pleasant, Wisconsin, this month filed a proposed class action suit 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 has violated the federal Clean Air Act by using dozens of gas-burning turbines without required permits, and without pollution controls in place from the start to power its facilities.
The types of turbines SpaceXAI used in Memphis can emit thousands of tons of smog-forming nitrogen oxides per year, according to manufacturers’ spec sheets. SpaceXAI also emits particulate matter called “PM 2.5,” or “particle pollution,” from construction and operations.
NAACP’s lawyers asked a judge for an emergency injunction in May to stop SpaceX from using dozens of turbines in Southaven. The U.S. Department of Justice swiftly stepped in, asking the court to toss the suit.
As part of their motion to intervene last month, the DOJ said SpaceXAI’s technology had been used in American military operations in Iran, and was now crucial for national security. They also argued the suit “threatens” America’s national, economic and energy security.
SpaceX is defending against the NAACP lawsuit, arguing the turbines currently on site are only temporary, and plans are in place for permitted turbines with pollution controls.
Whitehaven, Tennessee resident Loretta Thornton lives right next door to xAI’s Colossus 2 data center.
Andrew Evers, CNBC
The NAACP released a guide for communities in January on how to protect themselves from “dirty data,” and a framework companies can follow to avoid clashes with neighbors like SpaceXAI experienced in Memphis.
Attorney Abre’ Conner, who leads the NAACP Center for Environmental and Climate Justice, said SpaceXAI and other companies are moving to areas that have already experienced industrial pollution, “deepening the sacrifice zones that many of these community members have been fighting to get out of for so long.”
In Whitehaven, Tennessee, where a majority of residents are black, long-time resident Loretta Thornton said she had invested some retirement and savings into reframing her house, which borders the fence line of Colossus II.
She said suggestions to sell and move away don’t seem viable, especially with housing costs and interest rates rising.
“You just have to endure this. And that’s all I’m doing,” Thornton said. “I know I cannot sell my property. Who will want to buy it, living beside this thing?”
— CNBC producer Andrew Evers contributed reporting.
