Elon Musk's xAI is spending at least $400 million building its supercomputer in Memphis. It's short on electricity.

• Elon Musk wants to build a "gigafactory of compute" for xAI in Memphis.
• The company has already spent more than $400 million building it, public records show.
• xAI will need significantly more electricity than it currently has access to.

Elon Musk has said his artificial intelligence startup xAI is building the world's largest supercomputer in Memphis, Tennessee, and documents viewed by Business Insider show the company is putting hundreds of millions of dollars toward it.

Fourteen construction permit applications have been filed with a local planning and development agency since June 2024, when the deal was first announced.

Combined, they represent a total of $405.9 million in estimated project costs. The filings also show that xAI won't be able to get enough power from the local grid to run 1 million GPUs in Memphis, as Musk has said the company plans to do — unless it builds its own power generation on-site.

The permit applications were submitted for a range of electrical, mechanical, plumbing, and other work, including a $30 million installation of computer equipment and the construction of a $3.9 million perimeter fence built to withstand car crashes.

The most recent permit application on file, submitted in January, is for the construction of a new electrical substation.

Musk, who raised $12 billion in funding last year for xAI, has said that the site's "gigafactory of compute" comprises 200,000 Nvidia GPUs, half of which were installed in just 122 days, and wants to eventually scale to 1 million GPUs.

Musk and Memphis city officials have touted the billionaire's choice of location for the data center powering xAI's Grok 3 as a "multibillion-dollar investment" that will position Memphis as the "global epicenter of AI."

The projected construction costs are roughly in line with estimates for Stargate's initial facilities in Texas. That project, announced in January, is a joint AI venture between Oracle, OpenAI, and SoftBank.

Darana Hybrid Electro-Mechanical Solutions, a midsize general contractor based in Ohio, submitted the majority of the permits. Darana has previously worked on two other industrial construction projects in the Memphis area.

Darana is owned by Darryl Cuttell, a prolific small donor to President Donald Trump's 2024 reelection campaign. He made 21 contributions in amounts ranging from $100 to $1,000 between July and December last year.

A data center industry veteran who reviewed the permit applications said it's unusual for a smaller company like Darana Hybrid to handle a project of Colossus' scale. They were granted anonymity because they were not authorized by their employer to speak to BI.

Musk and representatives from xAI, Darana, Tennessee Valley Authority, and Memphis Light, Gas and Water did not respond to requests for comment.

Nvidia hardware can cost billions

Hardware costs will likely add up. Musk has said that Colossus is powered by a mix of Nvidia's H100 and H200 chips, including 100,000 H100s and 50,000 H200s.

TRG Datacenters estimated the H100 chips cost between $27,000 and $40,000 per unit, and the H200s cost $32,000 per unit. This means hardware for the Memphis sites could cost upward of $4.3 billion now and $27 billion for 1 million GPUs at the price of the cheaper H100s.

It's unclear if xAI is purchasing the chips or renting computing from a cloud service provider.

xAI spent $700 million on hardware for a separate data center in Georgia that it shares with Musk's social media company X. The site houses about 12,000 GPUs.

What we know about xAI's power capacity

Thus far, xAI has requested 300 megawatts of grid power from Memphis Light, Gas and Water and has been granted approval for 150 megawatts.

In permitting applications for on-site natural gas turbines, the company said getting access to the full 300 MW of grid power will depend on "significant infrastructure upgrades" and transmission improvements in the region. In the meantime, xAI has been supplementing its power supply with gas-powered generators from Caterpillar subsidiary Solar Turbines. These produce a combined 250 MW.

xAI can't serve customer needs "without additional on-site power generation," the company said in a permitting application. TVA, which serves electricity to most of Tennessee and portions of six surrounding states, said in February that it intends to spend $16 billion over the next several years to meet the historic load growth in its territory, driven by power demand from xAI and other data centers and battery manufacturers expanding in the region.

With its on-site capacity, xAI could likely power 200,000 Nvidia H100 GPUs, though adding additional computing would be challenging, said Shaolei Ren, an electrical and computer engineering professor at the University of California Riverside.

"It's still possible, but that means an aggressive oversubscription strategy is used," Ren said, referring to a practice used by data centers to "overbook" customers with the expectation that they won't all need to use the amount of power they've contracted for at the same time.

By Ren's calculations, one million GPUs could require over 1 gigawatt of electricity to power, or quadruple the amount xAI currently has access to in Memphis.

In March, an LLC tied to xAI paid $80 million for 186 acres of land south of its initial site. One of the parcels includes a one-million-square-foot industrial warehouse. xAI has asked TVA to assess the site for access to 260 MW of grid power.

In January, MLGW CEO Doug McGowen said during a Memphis city council meeting that the city's power grid might not be capable of powering a project of that magnitude.

"People can announce many things, and I think that's important for our community — that we get excited about opportunities that are coming. But as you know, there's pragmatic realities about a lot of things," McGowen said.

Do you work for xAI or one of Musk's companies? Reach out to Grace via a nonwork email and device at gkay@businessinsider.com or through the encrypted messaging platform Signal at 248-894-6012. Contact Ellen Thomas at ethomas@insider.com or on Signal at 929-524-6964.