SpaceX's IPO filing reveals plans to allocate $2.8 billion toward natural gas turbines, while Tesla is supplying $269 million worth of Megapack energy storage units to the xAI computing project. This marks a significant pivot for Elon Musk, who previously championed a swift transition away from fossil fuels.
Back in March 2015, Musk told Neil deGrasse Tyson that burning fossil fuels was 'unquestionably the dumbest experiment in human history,' citing finite reserves and the futility of artificially altering the atmosphere. Now, eleven years later, SpaceX's S-1 filing discloses a commitment of over $2.8 billion over the next three years to purchase natural gas turbines for powering AI data centers, as reported by Wired on May 20, 2026, and Benzinga on May 21, 2026.
Where the money goes
Of the total outlay, roughly $2 billion is earmarked for mobile gas turbines, with an additional $805 million in turbine orders already placed and deliveries scheduled through 2029. The power infrastructure is designated for the 'Colossus' computing complex near Memphis, Tennessee, which serves the xAI initiative. Following a merger completed in early 2026, xAI was folded into SpaceX, creating an entity with an estimated valuation of $1.25 trillion, according to Built In and GovCon Wire. Teslarati reported in February 2026 that the merger structure was designed to isolate the legal liabilities and debts of both parties.
The scale of computing demand and key tenants
Data Center Dynamics, citing the SpaceX IPO documents on May 21, 2026, noted that Anthropic pays Musk's enterprise $1.25 billion monthly to lease computing capacity from xAI's data centers. During SpaceX's first post-IPO earnings call, Musk revealed that the AI segment generated $2.6 billion in revenue, a 247% year-over-year increase. Current nameplate capacity stands at 1.4 gigawatts, with a target of bringing 20 gigawatts of power, cooling, and electrical equipment online by the end of 2027.
Why natural gas, and why now
AI data centers require massive, rapidly scalable power loads that the U.S. public grid often cannot deliver on schedule. Some regions have already enacted moratoriums on new data center grid connections until 2030. Operators are turning to on-site natural gas generation, also known as 'behind-the-meter' power or 'dark energy.' Electrek reported on August 10, 2026, that Musk's Terafab chip factory will run on natural gas rather than Tesla solar panels.
The Memphis project's troubled backdrop
xAI operates dozens of gas turbines around Memphis, with reports varying between 46 and 69 units, though only about 15 hold formal permits from state regulators. xAI argues that its trailer-mounted 'mobile' units do not require the same state air quality permits as fixed equipment. However, the Environmental Protection Agency has ruled that this interpretation violates federal air pollution regulations. The NAACP and the Southern Environmental Law Center have sued xAI, seeking a court injunction, noting the region is already among the worst in the nation for air quality, with the project projected to emit over 2,000 tons of nitrogen oxides annually. Conversely, Electrek reported on June 17, 2026, that the Department of Justice sided with the company, arguing the turbines are critical to national, economic, and energy security. Litigation remains ongoing.
Current status and outlook
TechCrunch reported on July 31, 2026, that SpaceX will not dismantle all unpermitted xAI turbines within a year. AI Insider noted on August 3 that the company will phase out unpermitted units by 2027 while constructing a permanent natural gas plant featuring roughly 41 turbines, each with a capacity of 16-50 megawatts. The project also incorporates battery storage: Electrek reported on June 4 that xAI purchased an additional $269 million in Megapack storage systems from Tesla. Tesla closed at $342.27 on August 14, 2026, down 23.89% year-to-date, while SpaceX closed at $140. The open question remains: will the Memphis project become a replicable blueprint for U.S. AI infrastructure, or a cautionary tale?
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