SpaceX set to throttle data center strategy after major power and cooling setbacks

SpaceX (NASDAQ: SPCX) is changing the way it builds AI data centers, choosing to prioritize power and cooling redundancy over raw build speed, per The Information. The slight tweak is likely to put the brakes on SpaceX’s infrastructure expansion, with little time left to meet a September 30 deadline tied to a $920 million-per-month compute deal with Google. Why redundancy is now the focus Thechange is a reversal from the approach that brought SpaceX (NASDAQ: SPCX) this far. For over 12 months, the company was squarely focused on ensuring compute gets online. Redundancy in backup power and cooling was treated as an afterthought. Now, the tide has turned, as a number of SpaceX sites in Tennessee and Mississippi went without backup cooling or power for months. As the primary systems dropped, the machines dropped also. The system failures impacted the training for Grok, SpaceXAI’s chatbot. Though the reporting is yet to be verified, it’s important to note that if truly power and thermal design are challenges, then this is not peculiar to SpaceX but the whole industry. The $920 million clock The redundancy fix comes as SpaceX races against time to meet the September 30 deadline tied to its deal with Google. SpaceX agreed to supply Google with access to about 110,000 Nvidia GPUs for a fee of $920 million per month. Those chips have to be delivered by September 30 to Google. Based on the agreement, Google is free to walk away, accept fewer GPUs, or slash payments proportionally after a grace period of one month This is why SpaceX optimized for speed initially. Revenue goes down the drain each day a data center is inoperative. AI data center revenue sits at $10 million to $12 million per megawatt per year, based onCleanview’s estimates. Thus, bringing a large site online early can mean tens of billions of dollars over its life. SpaceX’s expenditures only prove how urgent the matter is. In Q2, it spent around $15.8 billion on AI-related capital expenditure, twice what it spent in Q1. That brings capex in the first half of the year to $23.6 billion. The AI division also lost $3.7 billion in the first half of the year, as compute capacity increased from 0.4 gigawatts to 1.4 gigawatts and AI revenue in Q2 rose over 210% to top $2.5 billion. Turbines, permits, and a backlash in Mississippi The issues with reliability began with how SpaceX sourced power. Its Mississippi site feeds Colossus 2, and the grid on the site was unable to supply electricity on time. It made use of portable gas turbines, which were permitted by state law to be used for a year without air permits. Mississippi regulators spotted 69 temporary turbines at the Southaven plant by July.