According to three individuals with knowledge of the matter, SpaceXAI, the artificial intelligence business unit under Elon Musk, is preparing to construct at least one new large-scale data center in Texas. This expansion would significantly boost the company's AI computing resources beyond its existing compute hub in Memphis, Tennessee.

The commercialization of SpaceXAI's proprietary AI product, Grok, has progressed slower than anticipated. With the company recently securing agreements to lease out its computing power, a successful expansion in Texas could position SpaceXAI as a significant player in the cloud compute services market.

Two sources indicated that over recent months, SpaceXAI has been evaluating multiple potential sites in Texas and exploring various construction approaches. Options include building on newly acquired land or retrofitting existing warehouses, a method similar to how the company converted an old factory to create its first data center in Memphis.

One insider stated that the scale of the planned new Texas project is intended to match or even surpass the existing compute cluster in Memphis. SpaceX has publicly disclosed that its two operational data centers have a combined power capacity of approximately 1 gigawatt, housing hundreds of thousands of Nvidia GPUs.

Two sources revealed that SpaceXAI has already reassigned staff from its existing data centers to Texas for preliminary expansion preparations. Last month, the company posted job listings in Austin and Bastrop for a data center development lead. The role description includes responsibilities for site selection, lease negotiations, and asset acquisition to facilitate data center deployment. Earlier this month, SpaceX also advertised temporary positions to support data center construction, expansion, and operations in locations like Conroe.

While Musk has publicly envisioned a future network of massive orbital data centers, SpaceXAI's current compute infrastructure expansion remains focused on terrestrial facilities. The company has stated it does not rule out further expansion of ground-based data centers but has not publicly disclosed locations for any new AI compute facilities.

Continuous construction of new compute facilities will further escalate AI infrastructure spending. SpaceX's AI-related capital expenditure surged to $7.7 billion in the first quarter, roughly triple the amount from the same period last year. Analysts from Morgan Stanley predicted prior to SpaceX's June IPO that AI-related capital expenditures alone would consume a combined $120 billion in cash over the 2026-2027 period.

In June, the CEO of Supermicro posted on social media platform X that the company was assisting SpaceXAI in building another gigawatt-scale AI data center within a year, though the specific project location was not mentioned. This AI server manufacturer has previously supplied SpaceXAI with servers and cooling equipment equipped with Nvidia chips.

The timeline for bringing the new Texas data center online remains unclear. Local authorities in Conroe, Texas, have received multiple inquiries but have not responded. SpaceX also declined to comment on this report.

Ahead of its IPO, SpaceX highlighted rapid compute capacity scaling as a core competitive advantage for its AI business. However, challenges in expanding its Grok product to enterprise customers prompted Musk to undertake a comprehensive strategic overhaul of the AI product line in recent months.

In June, SpaceXAI announced agreements to lease out its computing power to companies including Anthropic and Google. With the first quarter seeing heavy investment in AI infrastructure and significant cash consumption, this compute leasing business represents a new revenue stream.

Musk has noted, however, that SpaceXAI can reclaim the leased computing power for its own needs at any time. Additionally, SpaceX finalized a $60 billion acquisition of AI startup Cursor, which plans to move beyond code tools and develop a top-tier general-purpose large language model by the end of this year.

LinkedIn information shows that SpaceXAI significantly expanded its data center team over the past year, adding over 40 employees for the Colossus compute cluster. One source disclosed that following the integration of the former xAI into SpaceX in February 2026, internal SpaceX employees were also reassigned to support data center operations.

Another source stated that preparations for the Texas data center expansion have been underway for several months. The past year has seen the business unit undergo multiple organizational restructurings and frequent management changes. Notably, former xAI co-founder Ross Nordeen, who was previously fully responsible for data center construction and reported directly to Musk on project progress, departed in March.

In early April, SpaceXAI President Michael Nichols completed management appointments, announcing in an internal memo that Jake Palmer would oversee physical infrastructure, while SpaceX Software Engineering Director Daniel Duery would lead the compute infrastructure division.

SpaceXAI's currently operational data centers rely heavily on natural gas turbine generators to supplement grid power. The company has deployed dozens of mobile gas turbines in Tennessee and Mississippi. It has also formed a joint venture with Houston-based Solaris Energy Infrastructure to build a permanent gas-fired power plant in Mississippi.

Concurrently, SpaceXAI is advancing further expansion within the Memphis area, planning a third data center. Late last year, the company purchased an 810,000-square-foot warehouse in Mississippi, adjacent to the existing Memphis compute cluster.

In Memphis, however, SpaceXAI faces strong opposition from local residents, politicians, and environmental groups over its use of gas turbines and water consumption. During a cost-cutting initiative launched earlier this year, the AI business unit postponed an $80 million wastewater recycling facility project designed to treat and reuse water from the data center and surrounding industrial sites.

One source indicated that in recent weeks, alongside its Texas plans, SpaceXAI has also dispatched employees to scout locations in Florida and simultaneously posted data center job openings in Jacksonville.

A spokesperson for the Jacksonville city government stated last week that they had not received any data center proposals from SpaceXAI and there had been no communication. The spokesperson did not respond to follow-up requests this week.

Musk's enterprises already have industrial connections to both regions. SpaceX and Tesla are jointly building the Terafab semiconductor factory in Grimes County, near Conroe. Federal Trade Commission filings show that Musk acquired Jacksonville-based power generation company APR Energy in May.

State business records indicate that APR Energy's operations cover areas where SpaceXAI is establishing data centers, including Tennessee, Mississippi, and Texas. Sources confirmed that Musk's AI business has previously purchased gas turbine units from APR Energy.