The Memphis City Council meeting on Tuesday had already been going on for more than four hours by the time Doug McGowen, the CEO of the city’s public utility, sat down to present. The councilmembers had just received a grim update on the city’s declining annual murder rates, but were rather attentive as McGowen turned the conversation to xAI.
It was last summer when Elon Musk made a surprising foray into my hometown—Memphis, Tenn.—with plans to build a supercomputer. In a matter of months, xAI had set up a computer with 100,000 GPUs in an enormous factory in an industrial district near the Mississippi River—all to train its proprietary large language model, Grok. Tesla megapacks were shipped in, and generators were set up to power the center so it could operate as xAI tried to get on the city’s grid.
But getting onto the city’s grid is easier said than done, as McGowen shared in this week’s City Council meeting. Companies have to file individual requests with the Memphis utility, MLGW, which will then have to turn around and study all potential impacts to the local, regional, and national power grid before it offers a path to move forward. After all, power outages are a huge risk.
McGowen disclosed in the meeting that the utility is still working on xAI’s first request for 150 megawatts of power, which has required them to schedule construction for a substation (paid for by xAI) and run a transmission line out to the facility. xAI’s subsequent 150 megawatt power request is still under initial review, and McGowan said in the meeting that it was “uncertain at this time…when or if that load will come online.”
But the big wrinkle, as I wrote about yesterday, is whether Memphis’ power infrastructure is capable of supporting the additional computing power that xAI says is coming soon. In December, the company declared at a city Chamber luncheon that its “Colossus” supercomputer would have some 1 million GPUs. That’s a massive expansion, and, as McGowen disclosed at this week’s meeting, xAI hasn’t shared any details of what an expansion of that magnitude would require power-wise. McGowen was clear to lay out that there are limitations to what Memphis’ transmission lines can handle without building new infrastructure.
“It is a physics problem, not a political problem, about how much energy can be provided here,” McGowen said.
All this points to a bigger, underlying problem that’s starting to surface as companies like xAI and OpenAI (which have raised billions of dollars from investors), along with Amazon, Microsoft, Meta, and Nvidia, build enormous AI data centers in cities across America to power their AI services. These AI data centers require massive amounts of electricity. In a report published last year, Goldman Sachs projected that the power demand from data centers would more than double by 2030. It’s an open question whether our power grids are even capable of handling this kind of compute power guzzling—and what it will mean for clean energy efforts.
It’s early, but there has been some data suggesting there has already been an impact on regional power grids. At the end of December, Bloomberg published an initial analysis that showed that AI data centers may be distorting the flow of electricity to millions of people—in both cities and rural areas.
And it’s clearly something many of these cities are thinking about as new data centers come online. “Our responsibility is to ensure that, number one, we do nothing to interrupt the bulk electric system or put any risk on that—because that’s the driver for the entire country,” McGowen said.
I’m spending a lot of time thinking about this these days, so if you have any thoughts or perspective on it, please reach out.
Just a note…Many readers, including Term Sheet’s Allie Garfinkle, have been impacted in some way by the wildfires in Los Angeles. I’m thinking about all of you right now, and please do what you can to stay safe.
See you tomorrow,
Jessica Mathews
X: @jessicakmathews
Email: jessica.mathews@fortune.com
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VENTURE DEALS
- Evergreen Nephrology, a Nashville-based kidney care provider, raised $130 million in funding. Rubicon Founders, Oak HC/FT, and existing investors led the round and were joined by K2 HealthVentures.
- XOCEAN, a Dublin-based ocean data provider for offshore energy operations, raised €115 million ($118.7 million) in funding from S2G, Climate Investment, Morgan Stanley’s 1GT fund, and an affiliate of the Crown Family’s CC Industries.
- NomuPay, a Dublin-based unified payments platform, raised £37 million ($45.7 million) in funding. Endeit Capital led the round and was joined by Uneti Ventures and existing investors.
- AerWave Medical, a New York City-based ultrasound-based therapies developer for respiratory diseases, raised $12 million in funding. Lucius Partners led the round and was joined by others.
- Biosphere, a Oakland, Calif.-based bioreactor developer, raised $8.8 million in seed funding. Lowercarbon Capital and VXI Capital led the round and were joined by Founders Fund, GS Futures, Caffeinated Capital, and B37 Ventures.
- Karman Industries, a Long Beach, Calif.-based electric industrial thermal energy technology developer, raised $7.5 million in funding from Wonder Ventures, 8090 Industries, and existing investors Riot and Space.VC.
- Fazeshift, a San Francisco-based accounts receivable AI agent, raised $4 million in seed funding. Gradient led the round and was joined by Y Combinator, Wayfinder, Pioneer Fund, angel investors, and others.
- RyboDyn, a San Diego-based dark genome-targeted immunotherapies developer, raised $4 million in pre-seed funding. Genedant Capital and SeaX Ventures led the round and were joined by SOSV and Swell VC.
- VitVio, a London-based AI-powered operating rooms efficiency and safety platform developer, raised $2 million in pre-seed funding. LDV Capital led the round and was joined by Bek Ventures, Tiny Supercomputer Investment Company, and angel investors.
PRIVATE EQUITY
- Ardian acquired Synergie Cad Group, a Carros, France-based semiconductor test interface solutions manufacturer. Financial terms were not disclosed.
- ATG Entertainment, a portfolio company of Providence Equity Partners, acquired SOM Produce, a Madrid-based theater company. Financial terms were not disclosed.
- AWP Safety, a portfolio company of Kohlberg & Company, acquired Site Barricades, a Fort Worth, Texas-based traffic control company; Integrity Traffic, a Sherwood, Ore.-based traffic control company; and WS Barricade, a Frederick, Colo.-based traffic control company. Financial terms were not disclosed.
- Battery Ventures acquired a majority stake in Signiant, a Lexington, Mass.-based media content transfer platform. Financial terms were not disclosed.
- B&R Auto, a portfolio company of Highview Capital, acquired Marler Auto Supply, an Idaho Falls, Idaho-based recycled automotive parts provider. Financial terms were not disclosed.
- Cuadrilla Capital acquired Gluware, a Sacramento-based intelligent network automation platform. Financial terms were not disclosed.
- GTCR acquired Concord Servicing, a Scottsdale-based specialized loan services software provider. Financial terms were not disclosed.
- Supreme Group, backed by Trinity Hunt Partners, acquired Curator24, a San Diego-based marketing and advertising agency for healthcare companies. Financial terms were not disclosed.
- Swoop, a portfolio company of New Mountain Capital, acquired MyHealthTeam, a San Francisco-based healthcare patient social network. Financial terms were not disclosed.
- WatchGuard Technologies, backed by Vector Capital, acquired ActZero, a Menlo Park, Calif.-based Managed Detection Response services provider. Financial terms were not disclosed.
EXITS
- Genstar Capital acquired a majority stake in Aperture, an Arlington, Texas-based forensic experts provider, from Trinity Hunt Partners. Financial terms were not disclosed.
OTHER
- Plains All American agreed to acquire Ironwood Midstream Energy Partners, a San Antonio-based crude oil and natural gas pipeline company, and all EFM-owned and outstanding Plains Series A Preferred Units from EnCap Flatrock Midstream for $800 million in cash.
- Flowers Foods agreed to acquire Simple Mills, a Chicago-based crackers, cookies, snack bars, and baking mixes provider, for $795 million in cash.
- ICF acquired Applied Energy Group, an Islandia, N.Y.-based energy technology and advisory services provider, from Ameresco. Financial terms were not disclosed.
IPOS
- Beta Bionics, an Irvine, Calif.-based automated insulin delivery device developer, filed to go public on the Nasdaq. The company posted $53 million in sales for the year ending Sept. 30, 2024. Sands Capital, Farallon Capital Management, Eventide Asset Management, RTW Investments, Soleus Capital, Omega Fund, and Wellington Management back the company.
- Maze Therapeutics, a South San Francisco, Calif.-based renal, cardiovascular, and metabolic diseases precision medicine developer, filed to go public on the Nasdaq. The company posted $168 million in license revenue for the year ending Sept. 30, 2024. ARCH Venture Partners, GV, Third Rock Ventures, Matrix Capital Management, and Foresite Capital back the company.
FUNDS + FUNDS OF FUNDS
- FTV Capital, a San Francisco-based growth equity firm, raised $3.4 billion for its eighth fund focused on $60 million to $300 million investments in enterprise and fintech companies and $651 million for its first fund focused on $20 million to $60 million investments in enterprise and fintech companies.
PEOPLE
- Fort Point Capital, a Boston-based private equity firm, promoted Michael Duffy to principal and David Sher to vice president.
- FTV Capital, a San Francisco-based growth equity firm, promoted Karen Derr Gilbert to partner and chief operating officer and Alex Malvone, Brent Fierro, and Paul Cabral to partner.
- Partners Capital, a London-based investment firm, promoted Lenia Ascenso and Leslie Fitzgerald to partner and Sameer Bahl, Jonny Brooks, Lauren Kirby, Joe Mason, and Amar Patel to managing director.
- Silversmith Capital Partners, a Boston-based growth equity firm, promoted Tod Pesses to principal; Conor Finn and John O’Connor to vice president; Jerry Jacobs to senior associate; and Steve Ellis to vice president of finance.
