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 SpaceX’s CEO, wrote in a note posted on the rocket company’s website that the merger is primarily about creating a space-based data center, an idea he has become obsessed with over the past few months.
“Currently, the advancement of AI depends on large-scale terrestrial data centers that require enormous amounts of power and cooling. The global power demands for AI cannot be met by terrestrial solutions, even in the near term, without causing hardship to local communities and the environment,” he wrote. (xAI has been accused of causing some hardship to communities near its data center in Memphis, Tennessee).
The merger values the combined companies at $1.25 trillion, according to Bloomberg News, which first reported the completed deal. SpaceX is reportedly preparing for an initial public offering (IPO) as early as June of this year. It’s unclear whether the merger will affect that schedule. Musk did not mention the IPO in his public notes.
The merger brings together two of Musk’s companies, each of which is facing financial difficulties. According to Bloomberg, xAI is currently burning through about $1 billion a month. Meanwhile, SpaceX generates 80% of its revenue from launching its own Starlink satellites, according to Reuters. Last year, xAI acquired Musk’s social media company X, which Musk claimed valued the company in total at $113 billion.
In his memo, Musk wrote that how many satellites it needs to continue to acquire to create these space-based data centers will ensure that SpaceX can secure a much larger ongoing revenue stream in the near future. (This revenue loop would seem even more attractive when you consider that the Federal Communications Commission requires satellites to be deorbited every five years.)
A space data center may be the stated goal, but SpaceX and xAI have very different short-term goals.
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SpaceX is currently trying to prove that its Starship rocket can send astronauts to the Moon and Mars, and xAI is competing with leading artificial intelligence companies such as Google and OpenAI. On Monday, the Washington Post reported that pressure on xAI was so great that Musk eased restrictions on Grok, the company’s chatbot. This contributed to Grok becoming a tool for creating AI-generated non-consensual sexual images of adults and children.
Musk is also the head of Tesla, The Boring Company, and Neuralink. Tesla and SpaceX previously invested $2 billion each in xAI.
