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

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

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

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

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

The merger brings together two of Musk’s companies, each with its own financial challenges. According to Bloomberg, xAI currently burns around $1 billion per month. SpaceX, meanwhile, gets as much as 80% of its revenue from launching its own Starlink satellites. according to Reuters. Last year, xAI has acquired Xthe social media company also owned by Musk, with Musk claiming a combined company valuation of $113 billion.

Musk wrote in his memo that a steady stream of many — though he did not specify how many — satellites will be needed to create these space-based data centers, giving SpaceX an even greater steady stream of revenue for the foreseeable future. (This revenue cycle probably looks even more attractive when you consider that satellites must be deorbited 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 can take astronauts to the moon and Mars, while xAI competes with leading artificial intelligence companies such as Google and OpenAI. The pressure on xAI is so great that the The Washington Post reported this on Mondaythat Musk has loosened restrictions on the company’s Grok chatbot — helping to make it 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.