SpaceX has officially acquired Elon Musk’s artificial intelligence startup, xAI, in a deal that creates the world’s most valuable private company, the spaceflight firm announced Monday. The merger unites two of Musk’s high-profile ventures under one umbrella, with a bold plan to build AI data centers in orbit.
In a memo posted to SpaceX’s website, Musk explained that the acquisition is driven by the need for space-based data centers. “Current advances in AI are dependent on large terrestrial data centers, which require immense amounts of power and cooling,” Musk wrote. He argued that Earth-based solutions cannot meet global AI electricity demands without creating hardship for communities and the environment. xAI has faced criticism for such impacts near its Memphis data centers.
The merger values the combined companies at $1.25 trillion, according to Bloomberg News, which first reported the deal. SpaceX is reportedly preparing for an initial public offering as early as June, though Musk has not confirmed whether the xAI acquisition will affect that timeline. The tie-up comes amid contrasting financial pressures: xAI reportedly burns $1 billion per month, while SpaceX earns the majority of its revenue from Starlink satellite launches.
Musk also revealed that creating space-based data centers will require a constant stream of satellites, potentially generating a steady long-term revenue source for SpaceX. With satellites mandated to be de-orbited every five years by the FCC, the plan could create a recurring business loop that benefits both ventures financially.
While the merger focuses on space infrastructure, the companies’ immediate goals remain distinct. SpaceX is advancing Starship missions to the moon and Mars, whereas xAI continues to compete with AI leaders like Google and OpenAI. The Washington Post recently reported that pressure on xAI led Musk to loosen restrictions on its Grok chatbot, a move that raised serious ethical concerns about AI misuse.
source: techcrunch