If you thought your phone or laptop was the future of AI, Elon Musk is thinking much bigger. SpaceX has acquired Musk’s own artificial intelligence startup, xAI, in a deal that values the combined company at $1.25 trillion, making it the world’s most valuable private company.
The move is driven by Musk’s obsession with space-based data centers. Current AI relies on massive land-based data centers that guzzle electricity and strain local communities. Musk says these centers “cannot be met with terrestrial solutions” without environmental and social costs.
The merger hints at using SpaceX’s satellite network to host AI workloads in orbit, creating a constant revenue loop since satellites need to be replaced every five years under FCC rules.
The financial picture is extreme. xAI is burning about $1 billion per month, while SpaceX generates up to 80% of its revenue from launching Starlink satellites. xAI also owns X, Musk’s social media company, which adds to the valuation drama. Musk did not say whether this merger will affect SpaceX’s rumored IPO as early as June.
The companies’ goals diverge sharply in the near term. SpaceX is racing to prove Starship can take humans to the moon and Mars, while xAI is chasing rivals like Google and OpenAI. Reports indicate pressure on xAI is intense, including controversies around its Grok chatbot, which has been misused for creating AI-generated sexual content.
Musk’s empire already spans Tesla, The Boring Company, and Neuralink, and Tesla and SpaceX had previously invested $2 billion each into xAI. Now, with AI and space finally under one roof, Musk seems determined to turn science fiction into a revenue-generating reality.
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