xAI is preparing an unprecedented investment in computing power. According to the Wall Street Journal, the company will spend more than $18 billion on the purchase of approximately 300,000 Nvidia graphics processors for the new Colossus 2 data center near Memphis.
Approximately 55,000 of these are Blackwell chips, Nvidia’s latest generation. This will give xAI a computing cluster that is more powerful than virtually all current installations from OpenAI, Anthropic, and Google DeepMind.
Construction of Colossus 2 began in March 2025 in a former warehouse complex in Memphis. The facility is set to be the successor to Colossus 1, which went into operation last year and contains around 200,000 older Nvidia processors.
According to an analysis by research firm SemiAnalysis, the new center is expected to consume more than one gigawatt of energy, making it the first data center in the world capable of training AI models on that scale. SemiAnalysis previously described how xAI managed to achieve a cooling capacity of 200 megawatts within six months, a pace that, according to the firm, is significantly higher than that of the major cloud companies.
Own power plant
To power this computing capacity, xAI is building its own power plant in the neighboring state of Mississippi on the site of a former Duke Energy facility. The old infrastructure will be completely dismantled and replaced with new turbines, transmission lines, and substations that will carry the power directly to the data center. According to documents reviewed by the Wall Street Journal, the plant will eventually be able to supply more than one gigawatt of electricity, enough to power nearly one million households.
Millions of liters of cooling water
The scale of the project also raises environmental concerns. Cooling the hundreds of thousands of chips requires millions of liters of water every day. xAI is therefore building an $80 million water treatment plant designed to recycle 13 million gallons of wastewater per day.
The investments are weighing heavily on the company’s balance sheet. xAI has reportedly informed lenders that it expects to lose around $13 billion this year. At the same time, it is trying to raise additional capital at a valuation of $170 to $200 billion. Analysts see Colossus 2 as an attempt by Musk to firmly position his AI company in the battle for computing power and influence. By combining its own energy supply, infrastructure, and software, xAI is attempting to build an ecosystem that is independent of traditional hyperscalers, according to experts.