SpaceX has acquired Elon Musk’s artificial intelligence startup, xAI, creating the world’s most valuable private company. The spaceflight company announced the merger on Monday.
Musk, who is also the CEO of SpaceX, wrote in a memo posted to the company’s website that the merger is largely about creating space-based data centers, an idea he has become fixated on over the last few months. He stated that current advances in AI depend on large terrestrial data centers, which require immense power and cooling. He argued that global electricity demand for AI cannot be met with terrestrial solutions in the near term without imposing hardship on communities and the environment. xAI has been accused of imposing some of that hardship on communities near its data centers in Memphis, Tennessee.
The tie-up values the combined company at $1.25 trillion. SpaceX has reportedly been preparing an IPO for as early as June of this year, though it is unclear whether the merger will affect that timeline. Musk did not address the IPO in his public memo.
The merger brings together two of Musk’s companies, each with its own financial challenges. xAI is currently burning around $1 billion per month. SpaceX, meanwhile, generates as much as 80% of its revenue from launching its own Starlink satellites.
Last year, xAI acquired X, the social media company also owned by Musk, with Musk claiming a combined company valuation of $113 billion.
In his memo, Musk wrote that it will take a constant stream of many satellites to create these space-based data centers, ensuring that SpaceX will have an even larger constant stream of revenue for the foreseeable future. This revenue loop is likely more attractive considering that satellites are required to be de-orbited 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 objectives. SpaceX is currently trying to prove that its Starship rocket is capable of bringing astronauts to the moon and Mars. Meanwhile, xAI is competing with leading artificial intelligence companies like Google and OpenAI. The pressure on xAI is so great that Musk recently loosened restrictions on the company’s chatbot Grok, which contributed to it becoming a tool for making AI-generated non-consensual sexual imagery 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.