Memphians still don’t have many details on xAI’s massive supercomputer project planned for Memphis, though a recent $700 million data center deal for X in Atlanta may offer some clues.
What we don’t know is:
• How much will the company actually invest here? (It’s been touted as “multibillion” and the “largest single capital investment in Memphis history.”)
• What exactly will the so-called Gigafactory of Compute do? (It’s proposed to power X’s Grok artificial intelligence. But how that will happen in Memphis remains hazy.)
• How many employees and new jobs will the project bring to Memphis? (Speculation says about 200 hundred jobs. But no one in the public is yet certain.)
• What will the real economic impact of the project be for Memphis?
• What will local leaders offer to the company in incentives to bring them here?
Many of the questions were slated to be answered next week. The project was supposed to go before the Memphis-Shelby County Economic Development Growth Engine (EDGE) on Wednesday, June 19. Officials cancelled that meeting in observance of the Juneteenth holiday. So, locals could be left waiting for a month for answers on xAI, unless EDGE calls a special meeting.
In the meantime, I took a suggestion from someone on the Memphis subreddit. (I couldn’t find the comment or I would’ve given you a shoutout). For what could happen in Memphis, they suggested looking to Atlanta.
Atlanta case study
X Corp. (not xAI) proposed to build a $700 million data center there in December. It already had a data center in the city and another in Portland, according to WSB-TV Atlanta. Incentive packages would decide whether the company brought its big, new project to Portland, Oregon or Atlanta.
“Either location, in addition to similar alternative locations, could serve as the near-term location for this infrastructure investment,” reads the company’s application to Develop Fulton, Atlanta’s EDGE equivalent. “The incentive is a critical part of the analysis and decision process of whether to locate the equipment in Atlanta, Portland, or other locations.”
For the new Atlanta project, the company asked Develop Fulton to approve a $700 million inducement and final bond resolution “to acquire, install and create the next generation of high-performance computing and Artificial Intelligence (AI) products for the X platform.” The company also asked for a tax break of more than $10.1 million over 10 years.
Taxes for the project in its first year were promised to be more than $4 million. Taxes over the project’s first 10 years would be more than $16.5 million.
The project would retain 24 jobs in Atlanta, not create new jobs. X Corp. predicted an overall economic impact of the project to be more than $241.7 million in 10 years.
The economic impact figure changed, though, from when X first brought the project to Develop Fulton, according to WSB-TV. The company’s original pitch to the board said the economic impact for the project would be more than $1 billion, way higher than the updated $241.7 million figure:
X Corp.’s proposal ended in a deadlock from the Develop Fulton board in December. The vote came after the board “got an earful from opposed residents,” according to The Atlanta Journal-Constitution.
One board member, Laura Kurlander-Nagel, said the X platform’s value dropped by more than half after xAI founder Elon Musk bought it. For her it was a concern and she voted against the project, according to London-based Data Centre Dynamics blog.
The Atlanta site, northwest of Downtown on Jefferson Street, was once proposed for another data center. Kansas-based Quality Technology Services (QTS) wanted to build a center there but asked Develop Fulton for a $45 million tax break over 10 years. The board voted against it, and, apparently, QTS moved on.
However, when the X project came back before Develop Fulton in January, it passed with that $10.1 million tax break included. Two board member voted against it.
Data boom
Data centers are booming in Georgia’s capital city. Atlanta City Council member Jason Dozier said the market is growing faster there than in any other U.S. city. Construction for data centers in Atlanta grew by 211 percent, Dozier said, from 2022 to 2023.
This is partly why he and council member Matt Westmoreland proposed a ban on building them close to transit stations and the Atlanta BeltLine. It was unclear whether the ban had yet passed.
“Despite their growth, data centers don’t create many local jobs compared to other sectors,” Dozier tweeted in mid-May. “This limits economic benefits for our communities. Their existence presents a trade-off, diverting resources and focus away from alternative, people-oriented development priorities.
Their existence presents a trade-off, diverting resources and focus away from alternative, people-oriented development priorities.
Atlanta City Council member Jason Dozier
“Additionally, the energy demand of these centers is substantial, oftentimes equivalent to an entire natural gas plant’s output, further stressing our fragile electric grid.
“By prohibiting new data centers near transit and the Atlanta BeltLine, we aim to preserve these vital corridors for people-oriented priorities like housing, retail, transportation, and green spaces.
“It’s time to ensure that our city’s growth is sustainable and equitable for all residents. Let’s work together to shape Atlanta’s future in a way that prioritizes the needs of our communities and that benefits all Atlantans.”
But urban Atlantans aren’t the only ones with qualms over data centers in the Peach State. Georgia state lawmakers voted to temporarily suspend a tax break on equipment for data centers, according to the Associated Press. The legislation followed a monthslong review of all of the state’s many tax breaks and incentive programs.
The bill gained traction as Georgia Power reported a massive spike in electricity demand, and the data center industry accounted for 80 percent of that growth, it said. Also, one lawmaker also cited a 2022 state audit report that found that the tax exemption for data centers returned 24 cents on the dollar.
However, Georgia Governor Brian Kemp vetoed the legislation in May. He said the bill’s July 1 deadline would have interrupted “projects that are already in development — undermining the investments made by high-technology data center operators, customers, and other stakeholders in reliance on the recent extension, and inhibiting important infrastructure and job development.”
Sierra Club Georgia Chapter Director G Webber called the move “beyond disappointing.”
“The surge in the demand for power from data centers is propping up old coal plants and causing a rush to build new gas infrastructure,” Webber said in a statement. “As a result, Georgia communities will see higher levels of air and water pollution, and our fight to curb the worst effects of climate change is hampered. Kemp is burying his head in the sand by refusing to address an issue already having such a significant impact on our state.”