SpaceXAI faces up to $6.1M fine over Mississippi data center work

By Amara Osei

Mississippi regulators are seeking civil penalties of up to $6.1 million against SpaceXAI for starting work on three data center sites without the correct permits.

The Mississippi Department of Environmental Quality (MDEQ) issued the notice to MZX Tech LLC, a SpaceXAI subsidiary, in an SEC filing disclosed yesterday. The notice alleges that construction disturbed the sites before coverage under Mississippi’s Large Construction Stormwater General Permit began.

The notice states: “MDEQ is seeking civil penalties of up to $25,000 per day, with preliminary claimed exposure of approximately $6.1 million across three sites.”

SpaceXAI said it is cooperating with MDEQ and is discussing a single agreed order to resolve the matters.

What does the MDEQ notice cover?

The three sites form part of a Memphis-area cluster built by SpaceXAI, now styled as SpaceXSI. Although the cluster sits near Memphis, Tennessee, all three referenced sites lie across the state boundary in Mississippi.

Macrohard and Macroharder are up and running. Minihard remains under construction. SpaceXAI’s fourth Memphis site is within the city itself.

Takeaway: Two data centers are operating, one remains under construction, and the penalty claim covers all three Mississippi facilities.

Can the government end the Clean Air Act case?

A US federal judge rejected the Department of Justice’s attempt to block an NAACP lawsuit against SpaceXAI concerning a gas-fired power plant in Southaven, Mississippi. The NAACP alleges that xAI violated federal law and state regulations by constructing and operating the plant without required permits.

The EPA sought to dismiss the case in its role as primary enforcer of the Clean Air Act. US District Judge Debra Brown said: “The EPA’s role as a primary enforcer of the Clean Air Act does not mean that the federal government retains complete control over all Clean Air Act litigation.”

The DOJ argued that the civil penalties and an injunction to halt turbine operations, both sought by the NAACP, would threaten national security and economic interests. The basis for that claim was not specified.

NAACP Director of Environmental and Climate Justice Abre' Conner said the DOJ tried to bypass the district court and failed. She said the case seeks to hold polluters accountable and that the ruling confirms the law applies to everyone, including the federal government. DCD has contacted SpaceXAI for comment.

SpaceXAI began its Memphis build-out in 2024, and its data centers have rarely been free of controversy since. Company CEO Elon Musk has donated about $445 million to support Republican candidates in the upcoming midterm elections and is a long-time backer of President Donald Trump.

Takeaway: The court has left the Clean Air Act case in place, with both penalties and a turbine shutdown order still at issue.

What do SpaceX’s quarterly numbers show?

SpaceX, the rocket operator now reporting neocloud revenue, released third-quarter results this week. The company generated $14.58 billion for the three months to September 30, up 151% and ahead of analysts’ estimates. AI revenue accounted for $7.6 billion.

SpaceXAI initially built the data centers to train and run its Grok chatbot. Over the past year, it struck major cloud agreements with Anthropic and Google to rent out its GPUs.

On the earnings call, Musk described an inflection moment across launch, connectivity and superintelligence.

SpaceXAI accounted for $16.4 billion of SpaceX’s $19.6 billion capital expenditure plan for the quarter. The company expects capex to remain at similar levels moving forward.

Takeaway: AI infrastructure dominates SpaceX’s investment budget, while AI services supplied $7.6 billion of quarterly revenue.