DOJ backs xAI in turbine suit, implicating SpaceX stock

The Justice Department asked a federal court to dismiss a Clean Air Act lawsuit against xAI, arguing that closing the gas turbines that power the company’s Colossus 2 data center near Memphis would “threaten American national, economic, and energy security,” according to a court filing. The department joined xAI and the state of Mississippi in asking the court to toss the case.

The NAACP filed the suit in April, alleging xAI operated 27 gas turbines without required permits at the Colossus 2 site in Southaven, Mississippi, just across the Tennessee border from Memphis. xAI contends the units are temporary and trailer-mounted; state regulators initially accepted that view and later issued a permit in March.

Environmental attorneys estimate the Southaven facility can emit more than 1,700 tons a year of nitrogen oxides, along with fine particulate matter and formaldehyde. They allege those pollutants disproportionately affect nearby majority-Black neighborhoods and have asked the court to halt operations and impose penalties. At xAI’s original Colossus site in South Memphis, the company previously ran as many as 35 unpermitted turbines before reducing the count and licensing 15 after legal pressure in 2025.

The DOJ filing cites a Defense Department declaration that links xAI’s operations to military use of Grok, the company’s AI model. Cameron Stanley, the Defense Department’s chief digital and AI officer, wrote that Grok is “one of only four cleared for Secret and Top Secret networks” and tied the model to recent U.S. military operations, including strikes against Iran. Administration officials have urged faster data center build-out as power needs for large AI models rise.

SpaceX absorbed xAI in February in an all-stock deal valued at about $1.25 trillion. The assets at issue — Grok, the Colossus data centers and the turbines — are now under SpaceX’s corporate umbrella. SpaceX completed an initial public offering that raised roughly $75 billion and priced near a $1.77 trillion valuation; its shares have traded above the IPO open price of $150.

The DOJ and xAI are seeking dismissal; the NAACP continues to pursue relief and a preliminary injunction hearing is reportedly set for August. A separate nuisance suit against the same site remains pending and the underlying environmental claims have not been resolved.