Elon Musk said Tuesday that both Tesla and his artificial intelligence company xAI will continue purchasing chips from semiconductor giants Nvidia and AMD — and possibly others. Speaking to CNBC’s David Faber, Musk shared that xAI has already installed 200,000 GPUs at its Colossus facility in Memphis, Tennessee.
The company also plans to build an even larger facility outside Memphis that will house 1 million GPUs. Musk did not specify how many chips had already been ordered or when they would be fully installed.
“A few years ago, I made a very obvious prediction, which is that the limitation on AI will be chips,” he said.
Prioritizing xAI Over Tesla
In 2023, Musk directed Nvidia to reroute a large GPU order to xAI ahead of Tesla, according to CNBC. Tesla’s Dojo supercomputer, located in Buffalo, New York, is currently being used to train its Autopilot and Optimus robotics systems.
At xAI, Musk boasted, that Colossus is the “most powerful training cluster in the world right now” with “over 200,000 GPUs training coherently.”
Memphis Facility Draws Environmental Criticism
Musk’s choice to expand in Memphis has drawn both praise and protests. City officials hailed the facility as helping transform the area into a “high-tech manufacturing hub.” However, local communities and environmental advocates have raised concerns over xAI’s use of natural gas-burning turbines to power the operation.
These turbines emit nitrogen oxides, which contribute to ozone formation and are linked to respiratory illnesses. According to earlier CNBC reporting, environmental groups claim xAI may have “violated the Clean Air Act” and local permitting rules for “major sources of air pollution.”
AI’s Growing Energy Demands
Musk emphasized that while chips are currently the biggest bottleneck in AI, the constraint will soon shift to “electrical equipment,” followed by a “fundamental electricity generation shortage” as early as mid-2026.
He contrasted U.S. and Chinese investment strategies, saying, “China’s investments in power generation currently exceed those by the U.S.” But he added that the U.S. retains an edge in innovation. “I think it’s somewhat of a cultural thing, which is that to have breakthrough innovation you have to question authority,” Musk said. “Fundamentally, you’re questioning the conventional wisdom when you do a breakthrough innovation.” In China, he noted, people don’t “generally like to question authority.”
Will xAI and Tesla Ever Merge?
Faber asked if Musk had considered merging xAI and Tesla — a concept often discussed among Musk supporters who refer to his ventures as part of the broader “Muskonomy.” Musk replied, “It’s not out of the question,” but added, “It’s not something I’m currently thinking about,” and any merger “obviously would require Tesla shareholders support.”
Ongoing Collaboration Between the Two Companies
Tesla and xAI are already doing business together. Tesla disclosed in a financial filing that xAI spent about $191 million in 2024 and $36.8 million through February 2025 on Tesla Megapacks — utility-scale energy storage systems.
