A major contractor has sued Elon Musk's SpaceXAI for $432.5 million in unpaid wages, claiming the company stopped paying after merging xAI with SpaceX earlier this year. Darana Hybrid Inc, which helped construct data centers for the AI company, filed the lawsuit on August 6, seeking $136.8 million in damages for work completed at four Mississippi sites.

What Happened Between Darana Hybrid and SpaceXAI?

Darana Hybrid CEO Darryl Cuttell said his company had a solid working relationship with xAI before the merger occurred. According to Cuttell, payment stopped once the merger with SpaceX was finalized. The day after Cuttell made public comments about the money allegedly owed, SpaceXAI and its two subsidiary companies sued him in return.

SpaceXAI's countersuit claims Cuttell was engaged in a fraud scheme to fund "out-of-scope work on hot rod projects." The company alleges that Darana Hybrid withheld tens of millions of dollars in payments to vendors and suppliers to pressure SpaceXAI into paying. SpaceXAI is demanding at least $500 million in damages, plus mitigation costs, punitive and statutory damages, and court costs.

The financial strain has had real consequences for Cuttell. He purchased the International Hot Rod Association last year and planned major renovations at the Memphis Motorsports Park in Millington, which has since been renamed the Darana Motorsports Park. Cuttell told Action News 5 that the project has been placed on indefinite hold and that he is considering selling off IHRA properties to pay his bills.

How Are Data Center Disputes Affecting SpaceXAI's Operations?

• Legal Challenges: Darana Hybrid is not the only entity dragging SpaceXAI into court over data center issues. Both the NAACP and Southern Environmental Law Center sued SpaceXAI over the use of gas turbines without permits at its Colossus data center in Memphis, Tennessee.
• Government Support: The Department of Justice sided with SpaceXAI in the environmental lawsuit, ruling that the turbines were a matter of "national, economic, and energy security." This decision reflects the company's alignment with the Trump administration, given that Musk is an ally of President Donald Trump and previously ran the Department of Government Efficiency.
• Transition Timeline: In late July, SpaceXAI announced plans to remove the permit-less gas turbines and transition to 1.2 gigawatt natural gas power plants for its data center energy needs. However, the company stated that the 69 gas turbines powering the data center will not be completely removed until July 2027, meaning the permitting issue will persist for nearly a year.

The Darana Hybrid lawsuit underscores the operational and financial complexities of building AI infrastructure at breakneck speed. While SpaceXAI has secured government backing for its environmental challenges, the contractor dispute reveals potential vulnerabilities in how the company manages its supply chain and vendor relationships during rapid expansion.

The outcome of both lawsuits could have broader implications for how AI companies approach data center construction and contractor management. As the AI industry races to build massive computing facilities to support large language models like Grok, disputes over payment and scope of work may become increasingly common.