Elon Musk’s AI firm xAI is making one of the biggest tech bets the US South has ever seen, with a data center project in Southaven, Mississippi valued at more than $20 billion.
State officials call it the largest private investment in Mississippi history and say it will anchor what could become a new regional hub for AI supercomputing.
- Location: Southaven, DeSoto County, just south of Memphis, Tennessee
- Project value: Corporate investment “exceeding” $20 billion
- Facility name: MACROHARDRR AI data center
- Planned compute: Nearly 2 gigawatts of AI training capacity
- Timeline: Operations expected to start around February 2026
What xAI is building in Southaven
The Southaven project centers on a huge existing building that xAI has bought and is now ripping out and rebuilding inside to support dense racks of AI hardware.
The facility sits close to a power plant site xAI recently acquired and near another Memphis-area data center the company already runs, giving the cluster shared energy and network links.
Officials say the MACROHARDRR site will push xAI’s “Colossus” training system to about 2 gigawatts of compute, a level Musk’s team claims would make it the most powerful AI system on the planet.
That capacity is expected to feed models behind xAI’s Grok chatbot and future multimodal systems that need massive parallel GPU clusters.
Short paragraphs like this make the story easier for young tech readers, and search engines can scan each block clean.
The retrofitted building setup also shortens construction time compared with a full greenfield campus, which helps xAI hit its 2026 go-live target.
Tax breaks, jobs and record incentives
Mississippi leaders have stacked together aggressive incentives to land the project, including a dedicated Data Center Incentive program.
That scheme waives sales and use tax on computing gear and software certified as data center equipment, a major saving given the GPU-heavy nature of AI builds.
- Sales and use tax exemption on eligible hardware and software
- State-level waivers on corporate income and franchise taxes tied to the project
- Local “fee-in-lieu” deals that sharply reduce property tax burdens in DeSoto County and Southaven
- Expected hundreds of permanent jobs, plus thousands of indirect construction and supplier roles over the build-out
Governor Tate Reeves called the $20 billion package “record-shattering” and framed it as a signal that Mississippi is chasing high-tech growth rather than relying only on traditional industries.
State talking points also stress that rising tax revenue from related activity can flow back into services like public safety, health programs, schools, parks and local infrastructure.
How xAI is funding the massive build
This Mississippi bet comes just days after xAI disclosed a huge upsized Series E funding round.
The company raised about $20 billion, overshooting an initial $15 billion target and valuing xAI at around $230 billion, according to Data Center Dynamics coverage of the financing.
- Series E size: roughly $20 billion
- Original target: $15 billion before demand pushed the round higher
- Use of proceeds: large-scale data center expansion and GPU procurement
The new Southaven complex is part of a three-site cluster in the greater Memphis area that xAI is building to host its next wave of generative AI systems.
Company executives say the build-out pace must stay extreme to stay competitive with rival AI labs racing to scale compute.
Environmental questions and local pushback
While officials highlight jobs and tax gains, the data center story is already sparking environmental and community questions.
Civil rights and environmental groups have raised concerns about pollution and industrial pressure around existing xAI facilities in nearby majority-Black Memphis neighborhoods.
A local Southaven group called Safe and Sound Coalition has circulated a petition urging tighter scrutiny and even shutdown of some xAI operations in the region.
By Thursday afternoon the petition had gathered hundreds of signatures, reflecting anxiety about air quality, noise, and long-term health risks from heavy power use and cooling equipment.
In public materials, Mississippi’s governor’s office says environmental responsibility is a core commitment for xAI at MACROHARDRR.
The company has not offered detailed public responses to every claim but is under pressure to show how it will manage emissions, water use and grid impact as the 2GW supercomputer comes online.
Why this matters for AI and data centers
For the global AI race, a 2GW-class supercomputer marks a serious escalation in raw training power, matching the trend of frontier models that need trillions of parameters and huge datasets.
Locating such a system in Mississippi also signals that hyperscale AI infrastructure is moving beyond familiar hubs like Northern Virginia or Silicon Valley and into lower-cost, high-incentive regions.
For Mississippi, the xAI announcement gives the state a flagship tech story just as lawmakers try to extend and refine incentive programs for data centers and semiconductors.
If MACROHARDRR executes as promised, it could attract cloud partners, chip suppliers, construction specialists and AI startups looking to cluster around the new facility.
(Source: datacenterdynamics, reuters)
