Elon Musk’s SpaceX officially acquires Elon Musk’s xAI startup, with plan to build data centers in space

Spaceflight company SpaceX announced Monday that it has acquired Elon Musk’s artificial intelligence startup, xAI, creating the world’s most valuable private company.

Musk, who is also CEO of SpaceX, wrote in a note posted on the rocket company’s website that the merger is largely about creating space-based data centers — an idea he has become focused on over the past few months.

“Current advances in AI rely on large terrestrial data centers, which require enormous amounts of power and cooling. The global electricity demand for AI simply cannot be met by terrestrial solutions, even in the near term, without imposing hardship on communities and the environment,” he wrote. (xAI has been accused of imposing some of these hardships on communities near its data centers in Memphis, Tennessee.)

The partnership values ​​the combined company at $1.25 trillion, according to Bloomberg News, which was first to report the completed deal. SpaceX is reportedly preparing for an IPO as early as June this year. It is unclear whether the merger will affect this timeline. Musk did not mention the IPO in his public memo.

The merger brings together two of Musk’s companies, each with its own financial challenges. xAI currently burns about $1 billion a month, according to Bloomberg. Meanwhile, SpaceX generates up to 80% of its revenue from launching its own Starlink satellites, according to Reuters. Last year, xAI acquired X, the social media company also owned by Musk, with Musk claiming the company’s total value was $113 billion.

Musk wrote in his note that it would take a steady stream of many satellites — though he didn’t specify how many — to create these space-based data centers, ensuring SpaceX would have a larger steady stream of revenue for the foreseeable future. (This revenue ring likely looks even more attractive when you consider that satellites are required to deorbit every five years by the Federal Communications Commission.)

While space data centers may be the stated goal, SpaceX and xAI have very different near-term goals.

SpaceX is currently trying to prove that its Starship rocket is capable of bringing astronauts to the Moon and Mars, while xAI competes with leading artificial intelligence companies such as Google and OpenAI. The pressure on AI is so great that Musk has eased restrictions on the company’s chatbot Grok — contributing to it becoming a tool for AI-generated non-consensual sexual images of adults and children, The Washington Post reported Monday.

Musk also serves as chairman of Tesla, The Boring Company, and Neuralink. Tesla and SpaceX previously invested $2 billion each in xAI technology.