SpaceX Takes Off with xAI: Elon Musk’s Vision for Space-Based Data Centers!

SpaceX has acquired Elon Musk’s artificial intelligence venture, xAI, resulting in the formation of the world’s most valuable private company, as announced by the spaceflight enterprise on Monday.

In a memo shared on SpaceX’s official website, Musk, who also serves as CEO of SpaceX, emphasized that this merger is primarily focused on the development of space-based data centers—an initiative he has been particularly enthusiastic about in recent months.

“The current advancements in AI rely heavily on large terrestrial data centers that consume significant power and require extensive cooling systems. The global demand for electricity to support AI cannot be sustainably met through terrestrial solutions in the near future without causing significant challenges for communities and the environment,” Musk articulated. (xAI has faced criticism for allegedly contributing to such challenges in the vicinity of its data centers located in Memphis, Tennessee.)

According to Bloomberg News, which first reported the successful deal, the combined entity is valued at approximately $1.25 trillion. SpaceX has been rumored to be preparing for an IPO as early as June of this year, but it remains uncertain how this merger may impact that timeline. Musk did not mention the IPO in his public communications.

This merger unites two of Musk’s enterprises, both of which face their own financial hurdles. As reported by Bloomberg, xAI is currently incurring losses of around $1 billion each month. In contrast, SpaceX generates up to 80% of its revenue through the launching of its own Starlink satellites, as per Reuters. Last year, xAI also acquired X, the social media platform owned by Musk, with Mush claiming the combined valuation to be approximately $113 billion.

Musk noted in his memo that a consistent stream of numerous satellites—though he did not specify an exact number—will be necessary to establish these space-based data centers, thereby ensuring that SpaceX continues to have a robust revenue stream well into the future. (This revenue potential is particularly appealing given that the Federal Communications Commission mandates satellites to be de-orbited every five years.)

While the creation of space data centers is the expressed aim, SpaceX and xAI have distinct immediate objectives.

SpaceX is working diligently to validate that its Starship rocket can transport astronauts to the Moon and Mars, whereas xAI is striving to compete with leading AI firms such as Google and OpenAI. The pressure on xAI is reportedly so intense that, according to the Washington Post on Monday, Musk has relaxed restrictions on the company’s chatbot, Grok, which has unfortunately led to its misuse in generating nonconsensual sexual imagery involving both adults and children.

In addition to leading SpaceX and xAI, Musk is also at the helm of Tesla, The Boring Company, and Neuralink. Both Tesla and SpaceX previously invested $2 billion each into xAI.