The NAACP is Taking On Musk and Trump in a Major Battle over Data Centers. Moody’s Just Upped the Stakes.

How Data Centers are allowed to expand in the U.S.—and the future of Elon Musk’s empire—Hang in the Balance

When the NAACP decided to oppose Elon Musk over the fume-spewing gas turbines powering his Colossus AI data center near Southaven, Mississippi, the civil rights group — and the residents it represents — may not have known how far that fight would expand.

The NAACP filed a Clean Air Act lawsuit in federal district court in Mississippi. Now both the State of Mississippi and the Trump administration — perhaps the biggest booster of the U.S. data center buildout — have jumped into the fray, both on Musk’s side.

The communities around the plant don’t want to breathe the polluted air from the gas generators that power Musk’s xAI operation. Southaven itself is about 39 percent Black; the heavily Black neighborhoods most exposed sit across the state line in South Memphis. The Clean Air Act lets citizens sue, and the NAACP and its Mississippi State Conference did just that — arguing on behalf of members in two states that Musk’s plant is breaking environmental law.

The geography is part of the story. The turbines being sued over sit at a former power-plant site in Southaven, Mississippi. The Colossus computing halls they help feed are largely across the state line in Memphis, Tennessee. Because the turbines are physically in Mississippi, the state’s regulators and a Mississippi federal court have the case — even though the emissions drift into South Memphis, too.

In a July 24 filing by the EPA, on behalf of Administrator Lee Zeldin, the Trump administration essentially told the court: tough luck. The federal government is involved now, and the NAACP has no right to sue.

“Stripping the Executive Branch of its preclusive discretion not to enforce the statute would also raise serious questions about the citizen-suit provision’s consistency with Article II,” the government argues. “While the NAACP disagrees, it misconstrues the Clean Air Act and the nature of Article II.”

It’s up to the federal government, and only the federal government, to decide whether or not to even enforce the Clean Air Act in the first place, Zeldin’s agency argues.

The Article II argument is only part of the defense. xAI and the government also say the NAACP lacks standing, because the Clean Air Act lets a party sue only “on his own behalf,” and the NAACP concedes it is suing “solely as the representative of its members.” 

And both xAI and the State of Mississippi argue the turbines never needed permits at all: Mississippi’s environmental agency, MDEQ, ruled the trailer-mounted units were exempt “mobile” and “temporary” sources. Either argument could end the case before a judge ever reaches the constitutional question. MDEQ has since ordered most of the turbines retired by April 2027, which the defense can cite to argue the dispute is winding down on its own.

And, on cue, Moody’s — the New York-based ratings agency — issued a report on Musk’s company on Aug. 10 that raised the stakes even higher. Moody’s said that for SpaceX — which owns xAI — to make its numbers in the future, it will need more data centers using the very gas turbines at issue in Mississippi.

“We would anticipate future deployments to follow an approach similar to that used at the company’s Colossus facilities, including the use of temporary power generation resources, such as gas turbines, to accelerate capacity deployment while awaiting permanent utility interconnections and grid infrastructure,” Moody’s wrote.

“This strategy is supported by continued acquisition of turbine assets to support SpaceX’s AI infrastructure expansion by providing interim power solutions for existing and future data centers, helping accelerate the deployment of compute capacity ahead of permanent grid connections,” the ratings agency said.

SpaceX’s June initial public offering, which valued the company at about $1.75 trillion, helped push Musk’s estimated net worth past $1 trillion. The company is central to his empire. Its stock trades at about $135; if it fell to $80, Musk’s other company, Tesla — which owns nearly 19 million SpaceX shares — would take a roughly $1 billion hit on its own books.

The lawsuit, NAACP v. X.AI Corp., No. 3:26-cv-00074-DMB-JMV, is before Chief U.S. District Judge Debra M. Brown in the U.S. District Court for the Northern District of Mississippi, Oxford Division. Brown, an Obama appointee confirmed in 2013, has been the district’s chief judge since 2021.

However the case is resolved at the district court, expect an appeal — first to the Fifth Circuit, and possibly, eventually, to the U.S. Supreme Court.

If it does reach the high court, things could get interesting. While the Roberts court has tended to support more generous readings of the Constitution for business interests, a recent opinion could add to the intrigue.

In 2024, the Supreme Court decided Loper Bright Enterprises v. Raimondo, and it overturned a 40-year-old rule known as Chevron.

Under the old rule, when a federal law was unclear, judges usually deferred to how the federal agency in charge chose to read it. Loper Bright ended that. Now judges must decide for themselves what a statute means, and an agency’s interpretation gets no automatic weight. That could work against the EPA in the Mississippi case. The EPA has sided with xAI and asked the court to throw the lawsuit out, arguing that the Clean Air Act does not let private groups like the NAACP enforce the law over the government’s objection.

Before Loper Bright, a court might have leaned toward the EPA’s reading simply because it was the agency’s view. After Loper Bright, the judge owes that view no deference and has to ask only what the law actually says — which means the EPA has to win the argument on the words of the statute, not on its authority to interpret them.

Any delay in the outcome could only add pressure on Musk and his empire. Analysts at Morgan Stanley have estimated that xAI could burn through as much as $120 billion in cash across 2026 and 2027 — more than SpaceX’s entire IPO raised — as it builds out data centers, including ones powered by the kind of gas turbines at issue in Mississippi. Moody’s, for its part, put SpaceX’s 2026 capital spending at roughly $65 billion, with a goal of 5 to 10 gigawatts of computing power by the end of 2027.

“Although rapid monetization of compute capacity may ultimately justify the additional spending, the company is increasingly dependent on execution across large-scale AI investments and the continued demand for contracted cloud compute services,” Moody’s said in its report. “Consequently, while current results are credit neutral, the longer-term credit implications will depend on the sustainability of AI infrastructure economics, the durability of customer demand, and management’s ability to balance ambitious growth initiatives with preservation of liquidity and financial flexibility.”

Moody’s did not mention the legal case now growing in Mississippi.