SpaceX has acquired Elon Musk's artificial intelligence startup xAI, creating what is now the world's most valuable private company, the spaceflight firm said on Monday.
In a note published on SpaceX's website, Musk said the merger is mainly aimed at building data centres in space. He argued that current AI systems depend on large data centres on Earth, which need huge amounts of electricity and cooling.
Musk said global power demand for AI cannot be met by land-based data centres in the near future without harming communities and the environment. His comments come as xAI has faced criticism over the impact of its data centres in Memphis, Tennessee.
"Current advances in AI are dependent on large terrestrial data centers, which require immense amounts of power and cooling. Global electricity demand for AI simply cannot be met with terrestrial solutions, even in the near term, without imposing hardship on communities and the environment," he wrote. "In the long term, space-based AI is obviously the only way to scale. To harness even a millionth of our Sun's energy would require over a million times more energy than our civilization currently uses."
"The only logical solution therefore is to transport these resource-intensive efforts to a location with vast power and space. I mean, space is called "space" for a reason," Elon Musk wrote with a funny emoji.
According to Bloomberg News, the deal values the combined SpaceX-xAI company at about $1.25 trillion. SpaceX has reportedly been preparing for a possible stock market listing as early as June, although Musk did not comment on whether the merger would affect those plans.
The deal brings together two companies facing different pressures. xAI is spending around $1 billion a month, Bloomberg reported, while SpaceX earns most of its revenue from launching and operating its own Starlink satellites.
Musk said space-based data centres would require a large and continuous flow of satellites, creating long-term demand for SpaceX launches. Satellites must also be removed from orbit every five years under US regulations.
Despite the merger, the two companies have different short-term goals. SpaceX is focused on proving its Starship rocket can carry humans to the Moon and Mars. xAI, meanwhile, is racing to compete with major AI firms such as Google and OpenAI.
Earlier this year, xAI acquired X, the social media platform formerly known as Twitter. Musk also runs Tesla, Neuralink and The Boring Company, with Tesla and SpaceX having invested billions of dollars in xAI.
Why say "Acquire" when Elon Musk owns both?
Legally, SpaceX and xAI were separate entities with their own distinct pools of outside investors, assets, and liabilities. By officially acquiring xAI, SpaceX now owns its intellectual property (like the Grok, chatbot) and its workforce, allowing for a "vertically-integrated innovation engine" under a single umbrella.
