A city’s dream deal promised jobs, money. Then residents learned it was with Elon Musk.

A city’s dream deal promised jobs, money. Then residents learned it was with Elon Musk.

MEMPHIS — For decades, this storied American city has watched companies come but mostly go, its vacant storefronts and blighted buildings a reminder of its days as a thriving manufacturing hub and the painful decline that followed as those jobs vanished.

As Paul Young, the city’s mayor, puts it, Memphis has been “the city people forgot about.”

Then last summer, Memphis landed what Young and local business leaders called the city’s largest corporate investment in a generation — a “transformative” development for a place that has struggled to convince outsiders of its continued potential.

The project was something every city dreams of, Young said in a recent interview — an estimated $12 billion private investment that came with no requests for tax incentives or other economic concessions demanded of Memphis in the past, one he believed could create hundreds of jobs. “A game changer,” he said.

Then came the mic drop, as some Memphians tell it: The city’s surprise suitor was Elon Musk. The tech billionaire had chosen a long-vacant appliance factory on the city’s south side to be the site of a multibillion-dollar supercomputer that would power his foray into the intense race to develop the world’s most sophisticated artificial intelligence model.

People visit Beale Street in Memphis on April 24, 2025. (Photo by Brandon Dill for The Washington Post)

Musk’s plan to launch xAI’s supercomputer was immediately viewed with suspicion and, in some cases, anger by residents who criticized the secrecy around the project and its environmental impact. They questioned how the massive data center’s appetite for power would affect Memphis’s vulnerable electric grid, already prone to sustained blackouts.

That debate has grown only more fraught in recent months, as the Tesla CEO has become one of the most polarizing figures in the country amid his close relationship with President Donald Trump, his embrace of right-wing politics and his controversial role as a self-portrayed hatchet man aggressively leading Trump’s efforts to dramatically downsize the federal government.

Representatives for Musk and xAI did not respond to repeated requests for comment about the project in Memphis. But in a separate interview with The Washington Post, Musk defended his work for Trump and said he is turning his focus back to his businesses, which he acknowledged had taken a reputational hit. A day later, Musk announced on X that his time working for Trump had ended.

The billionaire’s divisive reputation has only added to the controversy over xAI in Memphis. Critics have accused the company of skirting environmental laws with its use of dozens of temporary gas turbines to power its supercomputer, now branded as Colossus. A county health board is weighing whether to approve permits for some of those turbines, while opponents are pushing for Musk to simply take his business elsewhere.

“How many ways can we say this: Elon Musk, we don’t want you here,” a woman angrily declared during a contentious public hearing on xAI’s use of turbines in April.

What was once viewed as a dream investment has, in some ways, become a political nightmare for Young, a Democrat and first-time elected official, who has been navigating the awkward position of trying to defend xAI as a good thing for Memphis while also trying to sidestep the controversy that has enveloped Musk — a man he has never met.

With Musk and his company representatives largely silent on the controversy, it has fallen to Young to be the primary defender of xAI, which recently expanded to a second site with plans to build another, even more powerful, supercomputer in the city.

“I get it,” Young said of the anger and suspicion over Musk, adding that he separates “the man from the business proposition for our community.”

“He’s going to be rich regardless, whether the project is here or wherever it goes in the world,” Young said. “The job for us is to figure out how we are the epicenter of all the good that comes from being the center of that universe.”

An xAI data center under construction in the Whitehaven neighborhood of Memphis, which includes Graceland, the former home of Elvis Presley.

‘We need money’

Young, 45, was barely four months in office when he first heard about Musk’s interest in the city. In an unusual move — but one the Greater Memphis Chamber of Commerce, which led efforts to land the xAI deal, has defended as “standard practice” — a handful of local officials told of the project were asked to sign nondisclosure agreements before the announcement. Young said he was not asked to sign an NDA.

Young learned that Musk’s new AI company was looking for a large, empty building where it could get its supercomputer quickly up and running. Memphis had just the place, the mayor said: the former Electrolux factory located along a dusty industrial stretch near the Mississippi River.

The site, empty for nearly two years, was a sore spot. State and local officials had forked over at least $190 million in economic incentives to persuade the appliance manufacturer to relocate jobs from Canada to Memphis in 2014, only to see the facility close in 2022 as the company “consolidated” operations. More than 500 people lost their jobs.

The factory had served as an empty monument to the perils of risky corporate handouts by government officials desperate for economic growth. But now, Young saw hope. In his first talks with xAI that May, representatives indicated they would not seek any tax abatement, meaning the city would see its full share of paid property taxes — a “rarity,” Young said.

According to the mayor, xAI is expected to pay between $25 million and $30 million in property taxes this year, with the total expected to increase in coming years. About half of the money will go to Memphis, Young said. “Money we need.”

Memphis Mayor Paul Young (D) speaks during a ceremony ahead of the demolition of the Old Somerset Apartments in Memphis on May 21, 2025.

Oakhaven neighborhood resident Canada Walls walks with daughter Destiny Walls, 5, and granddaughter Ebony Walls, 2, past the vacant Somerset Apartments, which were slated for demolition in Memphis.

The mayor has touted this detail repeatedly before skeptical audiences, including residents who live near the xAI facilities and suffer from health problems they blame on pollution. He’s also working with the city council on an ordinance that calls for 25 percent of the tax money xAI pays to Memphis to go toward areas surrounding the facilities.

“We need investment in Memphis,” Young said during a contentious appearance at a church in March. “We need money. We’ve got housing problems, transit problems. We have roads where everybody is sending me messages about how we are going to fill the potholes.”

Young said xAI also agreed to pay for an $80 million wastewater recycling facility to cool its data center. The facility, something that had long been on the city’s wish list, will allow xAI to use gray water to cool the supercomputer instead of tapping into the Memphis Sand Aquifer, the region’s primary source of drinking water.

The mayor, who spent years trying to lure development to downtown Memphis before he ran for office, campaigned on a promise to transform his hometown, a majority Black city where lingering issues of racism, poverty and violence have only grown more pronounced amid tough economic headwinds.

On a recent afternoon, Young stood along a busy stretch of Highway 61 — the famous highway that once wove through thriving manufacturing cities but now is marked more by decline. For miles in either direction, the road was dotted with crumbling buildings, trash-strewn lots and other eyesores that the city didn’t have the money to clean up or fix. Every few blocks sat a cross — a marker to someone lost to the city’s epidemic of gun violence.

But Young did not see despair here. He saw only promise. Musk’s project, he said, could be the “catalyst for tremendous economic opportunity.”

Gas turbines at an xAI data center in Memphis in April.

Powering a supercomputer

By the time Musk’s “Gigafactory of Compute” was formally announced, construction had been underway at the old Electrolux site for weeks as the company raced to build Colossus. The supercluster of thousands of specialized servers linked together would form what Musk described as the world’s largest and fastest supercomputer.

Musk has never made a public appearance in Memphis, giving the debate over his presence in the city a feeling akin to the mostly unseen mastermind in “The Wizard of Oz.” He did not attend the xAI announcement, and for a while, his only acknowledgment that he’d visited the city was an X post Musk made the Sunday before in which he said he’d eaten challah French toast for breakfast here. The billionaire has since confirmed he was on-site last summer and has been deeply involved in the project.

Colossus, which powers the xAI chatbot Grok, came online last September, 122 days after construction began — wildly outpacing the estimated 18 to 24 months it would have taken if they had built a new facility, Musk said in February. “That’s why we’re in Memphis, land of Elvis,” he said.

Numerous elected officials, including members of the Memphis City Council, have complained they were not told about the xAI development before it was made public. They have joined residents in questioning the lack of outreach. Chamber officials have said the secrecy was to protect Memphis’s edge in a competition Young said included at least six other cities, none of which have been disclosed.

“They didn’t come to us at all. We found out when you found out,” Erika Sugarmon (D), a Shelby County commissioner, told residents at the April hearing.

Memphis residents protest Elon Musk’s xAI data center. Questions about how to power the xAI supercomputer and what it could mean for the city’s air quality remain largely unsettled.

Tennessee state Rep. Justin Pearson (D) says he has been surprised by xAI’s unwillingness to discuss its plans with public officials and residents.

State Rep. Justin Pearson (D), who represents Memphis and whose brother leads a group critical of xAI’s environmental impact, said he has been stunned by the company’s unwillingness to engage with public officials and residents — especially given the history of pollution in South Memphis. Pearson said he’d had a single meeting with Brent Mayo, a longtime Musk associate who is leading xAI’s Memphis operations, to address the company’s use of turbines, but that the company had declined further conversations in recent months.

Mayo, who has rarely given interviews about the project, did not respond to a request for comment.

A year later, questions about how to power xAI remain largely unsettled. Musk has since announced plans to massively increase the output of the data center and build a second, even more powerful one at another site about 10 miles from the first.

“Colossus 2,” as Musk calls the second supercomputer, will be the world’s “first gigawatt-class training cluster” and is expected to come online “in about six months, maybe nine,” the billionaire told CNBC.

Those estimates raised eyebrows in Memphis. Officials with Memphis Light, Gas and Water (MLGW), the city-owned utility that serves Memphis and Shelby County and that has been working with xAI, have described the “maximum” output of their electrical grid to be about 3.5 gigawatts. A gigawatt of power, if ultimately requested by xAI, would equal about 30 percent of electricity used by the entire county of roughly 910,000 people on its hottest summer days.

Individuals confront state Sen. Brent Taylor (R), center left, who attended a meeting hosted by the Shelby County Health Department that invited public comment on xAI’s permit to use gas turbines for a new data center.

Musk has indicated he’s thinking even bigger, writing on X that he’s been considering “the fastest way to bring a terawatt of compute online.” “That is roughly equivalent to all electrical power produced in America today,” he noted.

Young said he successfully pressed xAI to bring in Tesla Megapacks, giant external batteries that would allow the company to come off the grid at times of high use, as MLGW builds a new substation to expand power at the site.

As xAI dramatically ramped up the size and speed of Colossus last year, though, the company almost immediately struggled to meet its electricity needs. Musk said during a live stream in February that the company had brought in “trailer after trailer of generators” to help power the supercomputer. The generators were supported by the natural gas turbines that have become the focus of controversy among residents who contend they are polluting the air.

Musk’s company placed about three dozen turbines outside its site, though it only sought permits for 15, according to Shelby County Health Department. Young said the company told him 15 were running, but thermal images captured by a local environmental group suggested all the turbines were active. Critics accused xAI of violating federal clean-air laws, but the county said companies can operate turbines for a year without a permit.

xAI representative Brent Mayo speaks over boos during a meeting hosted by the Shelby County Health Department. He read from a prepared statement and could barely be heard above the rancor before he walked out.

Students give input during a public meeting about xAI’s permit application for the use of gas turbines to cool its data center.

Amid the backlash, the Greater Memphis chamber said in a May 6 statement that xAI planned to remove about half of the turbines over the next two months. The company was still seeking a permit to use the remaining machines until MLGW finishes its new substation.

The debate over whether xAI’s turbines are polluting the air is one with few concrete answers. Despite decades of complaints about bad air, the first dedicated air-quality monitoring system for the area was approved just weeks ago by the Shelby County commissioners, though officials said it was unclear when the system would be operational.

In late April, hundreds of people gathered at a South Memphis high school to speak out about xAI’s turbines. Dozens of Shelby County sheriff’s deputies along with Tennessee National Guard members were there to provide security, a surprising show of force for a public health hearing.

“What do they think we are going to do?” a woman asked in the parking lot, eyeing the massive security presence.

Inside, Mayo, dressed in an xAI hat and shirt, was surrounded by deputies. It was his third public appearance on behalf of the company in a year, and he was shouted down almost immediately as he read from a statement defending the company’s commitment to being a good partner to Memphis.

An attendee holds up a thermal imagery photo from the Southern Environmental Law Center claiming to show how many turbines are running at the xAI data center in Memphis.

“We are here to create jobs and support Memphis in being a leader in future technology,” Mayo said, his words barely audible. Visibly frustrated, he left the lectern and soon exited the meeting, trailed by officers. “Did he just leave?” someone shouted.

Residents then took to the microphones, many sharing how people in their families and neighborhoods suffered from cancer, asthma and heart issues after years of pollution. They said the city appeared to be prioritizing Musk’s company over their health.

Attendees also mocked the claim that xAI would create jobs, since Musk’s company is advancing a technology that many believe will eliminate jobs performed by humans. Others questioned why they should trust Musk.

Pearson, however, said it wasn’t about Musk and that he’d oppose xAI’s project no matter who was behind it.

“If someone is coming into our community to pollute, to hurt us, and to do harm to us, I don’t want them to be here,” the state representative said. “I don’t care if it’s Mother Teresa, I would be 100 percent opposed to it because it’s not doing right by people.”

Young, the mayor, stands by the project, pointing to new announcements from other technology companies that plan to expand operations here. Supporters say it is part of Memphis’s transformation into the “Digital Delta,” a nod to the city’s location atop the Mississippi River delta where cotton production and manufacturing once reigned.

Young said he is constantly meeting people “crying out for help,” leaving him determined to find ways to revive the city. “Because as mad as y’all are, I am, too,” the mayor recently told a room of xAI critics, speaking to the frustration he has felt seeing his hometown in decline.

“I know y’all feel like it’s us getting exploited, but we need to speak from a place of strength,” he said. “We need to exploit this project for our good.”

Attendees leave a public meeting in Memphis on the impact of xAI’s supercomputer, now branded Colossus.