Elon Musk’s SpaceX has officially acquired his artificial intelligence startup xAI, a move that could reshape the future of AI infrastructure.
The deal signals Musk’s growing focus on building data centers in space to meet rising global AI energy demands.
SpaceX announced on Monday that it has acquired xAI, Elon Musk’s artificial intelligence company. The merger combines two of Musk’s major ventures under a single corporate structure.
According to Bloomberg News, which first reported the completed deal, the combined company is valued at $1.25 trillion, making it the world’s most valuable private company.
In a memo published on SpaceX’s website, Musk said the merger is largely driven by plans to create space-based data centers. He argued that current AI growth relies heavily on massive terrestrial data centers that demand enormous power and cooling resources.
Musk warned that global electricity demand for AI cannot be met through Earth-based infrastructure alone without placing strain on communities and the environment.
Concerns over terrestrial AI infrastructure
The memo comes as xAI has faced criticism over the impact of its existing data centers. The company has been accused of imposing environmental and community hardships near its facilities in Memphis, Tennessee.
Musk did not directly address those allegations in his statement but positioned space-based solutions as a way to reduce future environmental pressure.
IPO questions remain unanswered
SpaceX has reportedly been preparing for an initial public offering as early as June, though it remains unclear whether the xAI acquisition will affect that timeline.
Musk did not mention the potential IPO in his public memo, leaving investors uncertain about the company’s near-term plans.
Financial pressures on both companies
The merger brings together two businesses facing distinct financial challenges. According to Bloomberg, xAI is burning around $1 billion per month as it competes in the fast-moving AI sector.
SpaceX, meanwhile, reportedly generates up to 80% of its revenue from Starlink satellite launches, according to Reuters. The new strategy could further strengthen that revenue stream.
Musk said the plan would require a constant flow of satellites to support space-based data centers, though he did not specify how many.
This approach could create sustained demand for SpaceX launches, especially as satellites are required by the US Federal Communications Commission to be de-orbited every five years.
Despite the merger, both companies remain focused on different immediate objectives. SpaceX is currently working to demonstrate that its Starship rocket can safely transport astronauts to the Moon and Mars.
xAI, on the other hand, is racing to compete with major AI players such as Google and OpenAI in an increasingly crowded market.
The Washington Post reported on Monday that mounting pressure on xAI led Musk to loosen restrictions on its chatbot, Grok.
That decision reportedly contributed to the chatbot being used to generate nonconsensual sexual imagery of adults and children, intensifying scrutiny around the company’s AI safety practices.
