Exclusive: Other Musk companies could consider Memphis; supercomputer will use 100K Nvidia chips
The Nvidia Corporation sign can be seen in Santa Clara, California, on Wednesday, May 31, 2023. The xAI supercomputer in Memphis will use 100,000 H100 Nvidia semiconductors. (Jeff Chiu/AP file)
Elon Musk-founded xAI will use 100,000 H100 Nvidia semiconductors at its Memphis supercomputer, and other Musk-tied firms could consider locating to the city, according to a source close to the company.
The company would likely use further, more advanced Nvidia chips in the latter stages of its “Gigafactory of compute” project, said the source, who requested anonymity because they were not authorized to speak publicly.
The source also noted the ample available land in Memphis for prospective expansion.
The company will spend much of the next year proving out the business case for xAI and the artificial intelligence the Memphis supercomputer will run, the source said.
The supercomputer site will employ fewer than 200 people in its first stage, double the minimum required if they pursue state incentives. The company has already interviewed 34 local employees and will likely use several types of engineers, the source said.
The source, who spoke with The Daily Memphian exclusively on Thursday evening, June 6, shed light on why the company chose Memphis, the site’s environmental impact and what tax incentives it could receive.
The source also added detail to some of Musk’s high-level comments on X about the project and the advanced computing power it will require to power xAI’s chatbot Grok — the ChatGPT competitor.
Why the company chose Memphis
xAI and Musk chose Memphis because of its “reliable” electric grid with available power, its water supply and ample land at fair prices, the source said.
It also chose Memphis because of how nimbly the Greater Memphis Chamber; Memphis Light, Gas and Water; and the Tennessee Valley Authority moved to secure the project.
The source described the nimble response as “highly unusual” compared to other locations across the world, exceeding the company’s expectations.
They noted the cooperation each local agency provided the company and the other local entities throughout the process.
The source praised the Chamber’s integrity, positive narrative, relationships and speed and commended the engineering staff at MLGW and its senior leadership.
The source also noted that Memphis is one of the remaining cities that houses vocational training, trade schools, logistics and apprenticeships, which the company is looking for in addition to higher education.
The company has a lease-to-own agreement with Phoenix Investment Group, the owners of the site it now occupies, the source said.
What about long-term water and electricity usage?
Supercomputers and data centers nationwide are the brains of the internet age. The sites require large amounts of electricity to run and are often cooled by lots of water.
MLGW CEO Doug McGowen said the project will add 5% to the utility’s electric load and 1% to its daily draws of freshwater from the Memphis Sand Aquifer.
The source close to the company said the site will use between 1.1 and 1.3 million gallons of freshwater from the aquifer a day when it is fully up and running.
Over the next six months, the site will test a closed-loop cooling system designed to conserve water. Over that time, it will use about 500,000 gallons of water, they said.
They said the company did not come to Memphis to “overconsume” but to be good custodians of the environment and the grid.
Gas turbines now power the site before it connects fully to the grid. The company plans to test how it can reduce power when demand on the regional electric grid reaches a “critical” point, so it can see how it would bring the supercomputer off the main grid during that time.
Events can strain the TVA grid. In December 2022, the TVA instituted rolling blackouts across its footprint during a deep freeze. A similar cold front brought energy conservation orders from TVA in January but no blackouts.
The source said the company chose the site, in part, because of how close it is to the Mississippi River and river water could one day cool the site.
They also expressed excitement at the prospect of the City of Memphis, TVA and MLGW building a plant that could purify wastewater to use as coolant.
What incentives will the project receive?
The company has been offered and is “entertaining” the local payment-in-lieu-of-taxes incentive. Such an incentive typically gives a company a 75% break on property taxes, though the structure and size incentive vary.
The source said the company plans to exceed any local and minority participation goals required by the incentive.
The company could also receive tax incentives from the state, the source said.
Where the site fits in the global AI race
xAI is among several companies worldwide racing to build the best artificial intelligence. The Wall Street Journal recently reported it was worth $24 billion.
The source said there will be nothing the supercomputer can’t handle or touch, including interpreting data, taking photos, verifying sources and computational engineering.
Chips, aka semiconductors, provide the computing power artificial intelligence uses to analyze data. Nvidia, the chipmaking company, has become one of the most valuable companies in the world because of its advanced chips.
CNBC reported Tuesday that Musk had diverted some of Nvidia’s shipments planned for Tesla, the electric carmaker, to X, the social media platform. X and xAI are tied together and Musk has said X shareholders will own some of xAI.
Musk responded to the CNBC story Tuesday, saying his other companies needed the semiconductors more.
“For building the AI training superclusters, NVidia hardware is about 2/3 of the cost,” Musk said on X.
That cost, and the computing power it pays for, will now call Memphis home.
Topics
Elon Musk xAI supercomputer gigafactory of compute Grok Subscriber OnlyAre you enjoying your subscription?
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Samuel Hardiman
Samuel Hardiman is an enterprise and investigative reporter who focuses on local government and politics. He began his journalism career at the Tulsa World in Tulsa, Oklahoma, where he covered business and, later, K-12 education. Hardiman came to Memphis in 2018 to join the Memphis Business Journal, covering government and economic development. He then served as the Memphis Commercial Appeal’s city hall reporter and later joined The Daily Memphian in 2023. His current work focuses on Elon Musk’s xAI, regional energy needs and how Memphis and Shelby County government spend taxpayer dollars.
Sophia Surrett
Sophia Surrett is a University of Alabama graduate, where she received her B.A. in news media and M.A. in journalism and media studies. She covers small business, nonprofits, restaurant real estate, hospitality and tourism, manufacturing, and transportation and logistics.
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