Two years after Elon Musk made Greater Memphis the center of his artificial intelligence ambitions, residents are grappling with noise and emissions from natural gas-burning turbines powering the SpaceXAI data centers known as Colossus and Colossus II. Public opposition is now providing a blueprint for other communities across the country pushing back against AI developments.
Rising Opposition and Policy Changes
This week, New York Gov. Kathy Hochul enacted a one-year moratorium on AI data center construction, drawing the ire of President Donald Trump, an ally of Musk. Last week, New Jersey Gov. Mikie Sherrill signed legislation ensuring data center operators pay a fair share for electricity, rather than shifting costs to residents and businesses. Other policy proposals, protests and litigation are underway, many directly citing Memphis and SpaceXAI.
"When you think about what precedent Colossus has set, it hasn't been a great one," said Jigar Shah, former director of the U.S. Department of Energy loan program office. "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."
In June, SpaceX pulled off a record-setting IPO, with AI and its Colossus facilities at the heart of its growth narrative. Google, Anthropic and Reflection AI have all signed agreements with SpaceX to rent excess computing capacity at the sites, deals worth up to $2.32 billion per month.
Local Impact and Legal Battles
Residents told CNBC that SpaceXAI never consulted them before breaking ground. Jason Haley of Southaven, Miss., whose house is within a mile of Colossus II, described the noise as "like a form of torture." Haley joined a neighborhood group called the Safe and Sound Coalition to take noise measurements and push for changes. In March, Southaven Mayor Darren Musselwhite pledged to "step-up tougher enforcement" on noise but told Haley, in emails read by CNBC, "you may want to consider selling your home." Musselwhite later told CNBC he has "worked countless hours to mitigate noise concerns" and "never told a citizen to move."
Haley and other Southaven residents sued SpaceX in a proposed class action lawsuit filed in June, alleging the company created a "public nuisance" with noise from Colossus II. In April, the Southern Environmental Law Center and Earthjustice sued on behalf of the NAACP in federal court, alleging violations of the Clean Air Act by using dozens of gas-burning turbines without required permits or pollution controls. The U.S. Department of Justice intervened, arguing SpaceXAI's technology is crucial for national security, citing its use in military operations in Iran.
Broader Community Concerns
A Gallup poll in May found that seven in 10 Americans oppose data center construction for AI in their local area, with 48% strongly opposed. Even Musk acknowledged the public distaste, saying in an interview with JPMorgan CEO Jamie Dimon, "There are very few people who want a power plant in their backyard."
SpaceXAI has purchased over 1,100 acres in Greater Memphis for its data centers and power plant. Memphis Mayor Paul Young said the company paid $25 million in taxes in its first year, making it the second largest tax-paying property in Shelby County after FedEx. However, he acknowledged that SpaceX has not yet delivered everything it promised, such as a delayed water recycling plant. Residents reported higher water and electricity bills, though the local utility, Memphis Light Gas & Water, said rates have not been impacted by SpaceXAI and attributed a 4% rate increase plan to other factors.
Communities in nearby Olive Branch and Jackson updated their zoning laws to avoid similar pitfalls. In Utah, state Senate president Stuart Adams and two other local officials lost in primary elections after supporting a proposed data center. The NAACP released a guide for communities on how to protect themselves from "dirty data," and a framework for companies to follow.