Two years after Elon Musk made Greater Memphis the center of his artificial intelligence ambitions and built out data centers and energy infrastructure at breakneck speed, residents are grappling with undesirable impacts such as noise and emissions from 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 development.
This week, New York Governor Kathy Hochul introduced legislation that would halt construction of AI data centers in the state for a year, drawing the ire of US President Donald Trump, an ally of Mr Musk.
And last week, New Jersey Gov. Mikie Sherrill enacted legislation to ensure data center operators pay their fair share of electricity bills, rather than passing the costs on to residents and businesses.
Other policy proposals, protests, and lawsuits are also underway, many directly citing SpaceXAI, which was acquired by Memphis and Mr. Musk’s defense contractors. space xin February.
“If you think about what kind of precedent Colossus set, it wasn’t a great one at all,” says Jigar Shah, former director of the U.S. Department of Energy’s Office of Loan Programs and a longtime energy entrepreneur. “This is certainly a case study in what not to do in most other parts of the country. But from a capitalist perspective, they got their reward.”
Jason Haley, a resident of Southaven, Mississippi, is participating in a class action lawsuit against SpaceX over power plant noise.
In June, SpaceX pulled off a record IPO with AI and its Colossus I and Colossus II facilities at the center of its growth story.
Google, Anthropic, and Reflection AI all have agreements with SpaceX to rent excess computing power on the Colossus and Colossus II, in deals worth up to $2.32 billion per month.
Residents do not feel the same benefits. Several people told CNBC that SpaceXAI never consulted them about the plans before breaking ground, even though it was clear the data center would have a significant impact on nearby neighborhoods.
Now, the noise coming from Colossus II and its gas-burning turbines is “kind of like torture,” said Jason Haley of South Haven, Michigan, whose home is less than a mile from the site. Southaven is part of the Greater Memphis region.
Rise of the opposition
Opposition to data centers is growing not only in opposition to xAI, but also in reaction to planned or ongoing developments. microsoft, Meta, google, OpenAI and other so-called hyperscalers.
In May, seven in 10 Americans said they opposed building local AI data centers, according to a Gallup poll. Almost half, 48%, answered “strongly disagree.”
Even Mr. Musk has acknowledged the public’s distaste for AI data centers and the power plants that run them.
“Very few people want to put a power plant in their backyard,” Musk said in an interview. JP Morgan CEO Jamie Dimon attends a roadshow ahead of SpaceX’s IPO. “For example, if we wanted to double the amount of electricity used in the United States, we would have to build twice as many power plants. Most communities are not very enthusiastic about that,” he says.
Musk and SpaceX did not respond to multiple requests for comment about the backlash against construction in Memphis.
SpaceX is building a large gas turbine power plant in South Haven, Mississippi, to power data centers in the region.
SpaceXAI has purchased more than 1,100 acres of land in Greater Memphis for its data center and power plant.
The data center was initially built to train and run xAI’s Grok AI models and chatbots, which sparked controversy.
Data centers have been around for decades, but a construction boom began after generative AI caused an explosion in the demand for data processing and electricity. Facilities typically require large tracts of land, energy to power the chips and servers inside them, and water to cool the high-tech equipment.
Despite their complexity, once built, data centers do not require large workforces to operate, and they do not always generate huge numbers of new jobs or large amounts of tax revenue.
Memphis residents and climate change advocates are sharing their experiences as lessons learned by other communities to push for updated regulations and better deals with data center developers.
Their testimony has directly and indirectly influenced policies, lawsuits, elections, and campaigns that have shaped beyond Memphis.
For example, the nearby communities of Olive Branch and Jackson updated their zoning laws, citing a desire to avoid the pitfalls Memphis residents faced when Mr. Musk moved into town.
In June, Utah Senate President Stuart Adams lost the Republican primary after supporting a data center plan backed by investor Kevin O’Leary. Two other local officials who supported the project also lost in primaries.
Loretta Thornton of Whitehaven, Tennessee’s home is right next door to xAI’s Colossus 2.
Musk’s Colossus I data center was completed in just 122 days, he said in a post on September 2, 2024, announcing that the data center is now online.
SpaceXAI paid $25 million in taxes in its first year of operation, making it Shelby County’s second-largest tax-paying facility after FedEx, said Memphis Mayor Paul Young, who helped bring the data center business to the county.
“Since this project began, we have been considering how to mitigate potential negative impacts and how to amplify positive impacts,” Young said. He acknowledged that SpaceX still hasn’t achieved everything it promised, including delays in building a water recycling plant meant to reduce the need for large amounts of water to cool Colossus’ equipment.
Residents in the Greater Memphis area told CNBC that their water and electricity bills have gone up since SpaceXAI moved into town.
Memphis Light Gas & Water said its water and electricity rates are “unaffected” by SpaceXAI.
“The planned 4% electricity rate increase over three years starting in 2024 is not due to data center loads,” a spokesperson for the utility company told CNBC in an email.
legal battle
Last year, Haley joined a neighborhood group called the Safe and Sound Coalition to take noise measurements, raise awareness, and encourage change from business and city leaders.
Southaven Mayor Darren Musselwhite promised in March to “further crackdown” on noise, but told Haley in an email read by CNBC: “You might want to consider selling your house.”
Musselwhite told CNBC in an email Thursday that he has “spent countless hours trying to alleviate noise concerns,” and that he has “never told citizens to move.”
SpaceXAI’s Colossus data center in Memphis, Tennessee, June 17, 2026.
Andrew Evers, CNBC
Haley and other South Haven residents sued SpaceX in a class action lawsuit filed in June, accusing the company of causing a “public nuisance” with Colossus II’s noise.
Following in their footsteps, neighbors of Microsoft’s Fairwater data center in Mount Pleasant, Wisconsin, filed a class-action lawsuit this month over noise issues.
In April, the Southern Environmental Law Center and Earthjustice filed a lawsuit against Musk’s company in federal court in Mississippi on behalf of the NAACP. They allege that the company violated the federal Clean Air Act by using dozens of gas-fired turbines without the required permits and by not taking pollution control measures in the first place to power the facility.
The type of turbine SpaceXAI is using in Memphis could emit thousands of tons of smog-forming nitrogen oxides a year, according to manufacturer specifications. SpaceXAI also emits particulate matter, known as PM 2.5, or particulate pollution, from its construction and operations.
Lawyers for the NAACP asked a judge in May for an emergency injunction to prevent SpaceX from using dozens of turbines in South Haven. The U.S. Department of Justice quickly intervened and asked the court to throw out the case.
As part of its motion to intervene last month, the Justice Department said SpaceXAI’s technology has been used in American military operations in Iran and is now critical to national security. They also argued that the lawsuit “threatens” the national, economic and energy security of the United States.
SpaceX is defending against the NAACP lawsuit, arguing that the turbines currently installed on site are only temporary and that plans are being developed for permitted turbines with pollution controls.
Loretta Thornton of Whitehaven, Tennessee, lives right next door to xAI’s Colossus 2 data center.
Andrew Evers, CNBC
In January, the NAACP released a guide for communities on how to protect themselves from “dirty data” and a framework companies can follow to avoid conflicts with neighbors like SpaceXAI experienced in Memphis.
Abre Conner, an attorney who heads the NAACP Center for Environmental and Climate Justice, said SpaceXAI and other companies are moving into areas already experiencing industrial pollution, “deepening the sacrificial zone that many local residents have long fought to escape.”
Loretta Thornton, a longtime resident of Whitehaven, Tennessee, where the majority of residents are black, said she invested some of her retirement money and savings into rebuilding her home, which borders the Colossus II fence line.
He said the proposal to sell and move did not seem viable, especially with rising housing costs and interest rates.
“You just have to live with this, and that’s all I’m doing,” Thornton said. “I know I can’t sell my property. Who would want to live next door to this property and buy it?”
–CNBC Producer Andrew Evers contributed reporting.
