SpaceX is planning to build a natural gas power plant in Texas to supply electricity for a new chip factory, while its campuses in Tennessee and Mississippi have already deployed gas turbines for power. The xAI "Colossus" supercomputer in Memphis is powered by gas turbines at its first data center campus.
Elon Musk is relying heavily on natural gas turbine units to support the expansion of data centers for SpaceX's artificial intelligence operations. The vision of popularizing electric vehicles through Tesla Motors (stock code: TSLA) once propelled Elon Musk to the top of the global wealth rankings. Now, he is embracing natural gas energy.
Last week, SpaceX (stock code: SPCX) disclosed plans to build a natural gas power plant in Grimes County, Texas, where a mega chip manufacturing facility is under construction. Meanwhile, Musk's industrial parks in Tennessee and Mississippi are using dozens of gas turbines to power data centers, which he describes as core infrastructure for training artificial intelligence, integral to his overall business strategy. Regulatory filings show that earlier this year, Musk also personally acquired a gas turbine manufacturer.
The primary driver behind this infrastructure buildup and Musk's energy shift is the massive electricity and power demand from SpaceX's next-generation AI research. This spring, the total capacity of behind-the-meter data centers (not connected to the public grid) in the U.S. was 2 gigawatts, with SpaceX's data centers accounting for three-quarters of that. Musk stated on an investor conference call on August 4 that by the end of 2027, self-generated power capacity could expand to about 10 gigawatts, potentially reaching 15 gigawatts. If achieved, SpaceX would become the largest data center operator in the U.S. According to data from research firm Cleanview, the current industry leader, Amazon Web Services, has a data center capacity of about 13 gigawatts.
Musk initially amassed his fortune through technologies aimed at replacing fossil fuels, such as electric vehicles, batteries, and solar energy. A decade ago, he called burning fossil fuels "the dumbest experiment in history" and warned that fossil energy would eventually run out. At that time, Tesla's mission was to "accelerate the world's transition to sustainable energy." Musk announced the Terafab project.
In recent years, however, his views have shifted. As his political stance moved rightward, he donated hundreds of millions of dollars to President Trump and the Republican Party, while Tesla's official tagline removed the word "sustainable." Some supporters argue that SpaceX's current energy strategy could ultimately reduce overall energy consumption: the company plans to deploy orbital data centers powered by solar energy in space. Natural gas power generation allows for rapid project execution, and once long-term space-based computing matures, the demand for ground infrastructure will decrease. Musk said during an online all-hands meeting on Tuesday (streamed via social platform X): "AI model training will remain on the ground, but daily AI inference and routine AI applications will be deployed in space." To support the orbital data centers, SpaceX plans to build a new solar factory in Bastrop, Texas.
Securing Power, Racing Against Time
The vast majority of large-scale AI computing projects cannot quickly connect to the public grid. In the short term, the only option for 24/7 stable self-sufficient power is natural gas generation. A 1-gigawatt AI data center consumes roughly the same amount of electricity as 1,000 Walmart stores or the entire city of San Francisco. Matching such massive power supply at a single location requires enormous investment in transmission infrastructure, which can take years to build. In many parts of the U.S., new data centers may not be able to connect to the grid until the 2030s. A growing number of companies are starting to build their own on-site gas-fired power plants, choosing not to connect to the public grid, a trend known in the industry as "Bring Your Own Power" (BYOP).
Last week, SpaceX disclosed detailed plans for the Terafab chip factory: the project's initial investment is $16.8 billion, with a campus building area of 100 million square feet. In addition to connecting to the local public grid, the company plans to build and operate its own natural gas power plant to ensure electricity supply. Riley Trettel, the lead for the SpaceX Terafab project, told a Grimes County commissioners' meeting last week: "We are adopting an on-site power generation approach and will also build large-scale battery storage arrays to store energy."
Musk settled on this route as early as the summer of 2024. Multiple semi-trucks transported mobile natural gas generator units to Memphis, Tennessee, for the data center project named "Colossus." This move sparked discontent and legal disputes among local residents and environmental groups, but it also helped xAI, then still an independent company, build its first data center in just four months. Aerial view of the xAI Colossus 1 supercomputer campus in southwest Memphis.
Michael Thomas, founder of Cleanview, said that building a project of similar scale in a market like Virginia and connecting it to the grid would take at least five years. SpaceX now has four sites around Memphis, spanning the border between Tennessee and Mississippi. Cleanview's analysis of May satellite imagery shows that the initial Colossus campus is now connected to the public grid, with a power supply of about 300 megawatts. The campus still retains nearly 200 megawatts of turbine capacity, and about two-thirds of the mobile gas units have been removed. The larger Colossus 2 campus draws power from a site in Mississippi, where turbine units continue to be added. According to a government agreement obtained through public records requests, as of July 30, xAI had deployed 69 temporary generator units at that site.
Industry Follows, Model Replicated
This unconventional power strategy has allowed SpaceX to secure two major cloud computing customers: a deal with Anthropic to provide computing power at $1.25 billion per month, and a supply agreement with Google at $920 million per month. Many competitors are now starting to follow suit. Cleanview is tracking 59 data centers across the U.S. that use off-grid, self-generated power, with a combined capacity of about 90 gigawatts, roughly equivalent to Texas's peak power load. Chevron recently signed a 20-year agreement to supply power to a Microsoft campus in West Texas using its own natural gas production. Pipeline giant Williams Companies is building an off-grid natural gas power facility for Meta in Ohio. A recent McKinsey survey shows that 65% of power industry respondents plan to deploy self-generation facilities, with 64% of those indicating they will rely on natural gas.
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