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 (NASDAQ: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 (NYSE: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.”
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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 (NASDAQ: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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