Elon Musk confirmed on April 9 that xAI has indefinitely paused construction of the Colossus Water Recycling Plant in Memphis, an $80 million facility that was supposed to reduce strain on the Memphis Aquifer by 9%. The reason: Colossus 2, xAI’s second massive GPU data center in the area, takes priority, according to the Commercial Appeal.

Separately, CFO Anthony Armstrong departed xAI after roughly six months in the role. The exit is part of broader C-suite turnover at Musk’s companies, The Information reported on April 9, as cited by CFO.com.

The Water Problem

The recycling plant was designed to repurpose 20% of wastewater discharge from the nearby T.E. Maxson treatment facility, redistributing 13 million gallons per day between xAI and the Tennessee Valley Authority for cooling purposes, according to the Commercial Appeal. Without it, xAI and TVA will continue drawing billions of gallons of fresh drinking water from the Memphis Aquifer, which also supplies the region’s residential water, the Daily Memphian reported.

The project had real momentum behind it. Elected officials and xAI staff held a ceremonial groundbreaking in October 2025. The Tennessee Department of Environment and Conservation approved an operations permit in January 2026. Seven construction permits had been filed with a combined estimated cost exceeding $17 million, according to the Commercial Appeal.

The city also has a buyback clause: if “substantial construction” is not completed within one year of the March 2025 land purchase agreement, Memphis retains right of first refusal on the 13-acre parcel, per the Commercial Appeal.

Colossus 2 Takes Priority

Colossus 2 sits on 186 acres in Memphis’s Whitehaven neighborhood, purchased in February 2025 for $79.9 million. xAI’s statement said the company is “committed to building a state-of-the-art water recycling plant in Memphis” but needs to complete Colossus 2 first. Musk’s X post confirmed the sequencing, according to the Commercial Appeal.

CFO Departure

Armstrong, a former Morgan Stanley banker and senior adviser for the Trump administration, was named xAI’s CFO in October 2025. He also led financial operations for X, formerly Twitter. His departure came alongside wider leadership changes across Musk’s business portfolio, CFO.com reported, citing The Information.

The Infrastructure Tradeoff

The pattern here applies beyond xAI. Building GPU clusters at the scale required for frontier AI training and agent inference creates cascading infrastructure demands: power, cooling, water, and the financial leadership to manage it all. xAI is choosing to complete the compute layer first and defer the sustainability layer. Whether Memphis residents and regulators accept that sequencing is a different question. The city’s buyback clause suggests they built in a deadline for exactly this scenario.