SpaceX Officially Acquires xAI, Plans to Build Data Center in Space

SpaceX has announced its acquisition of Elon Musk's artificial intelligence startup xAI, positioning itself as the world's most valuable private company.

Musk, who also serves as SpaceX's CEO, outlined in a memorandum that the primary goal of this merger is to establish space-based data centers—an idea he has been actively pursuing over recent months.

"Current AI advancements rely on large terrestrial data centers, which demand substantial electricity and cooling. Even in the short term, global AI power needs cannot be met by ground-based solutions without imposing significant burdens on communities and the environment," he wrote. (xAI has faced allegations of causing difficulties for communities near its data center in Memphis, Tennessee.)

According to Bloomberg News, which first reported the completion of the deal, the merged entity is valued at $1.25 trillion. SpaceX is reportedly preparing for an initial public offering as early as June this year, though it remains unclear whether the merger will impact this timeline. Musk's public memorandum did not mention the IPO.

The merger combines two of Musk's companies, each facing distinct financial challenges. Bloomberg reports that xAI currently incurs monthly expenses of approximately $10 billion. Meanwhile, SpaceX derives up to 80% of its revenue from launching its own Starlink satellites, as noted by Reuters. Last year, xAI acquired X, the social media company also owned by Musk, which he claimed achieved a post-merger valuation of $113 billion.

In his memorandum, Musk emphasized the need for continuous launches of a significant number of satellites—though he did not specify an exact figure—to build these space data centers, ensuring a larger and more sustainable revenue stream for SpaceX in the foreseeable future. (This recurring revenue model appears particularly attractive given that satellites must be decommissioned every five years to comply with Federal Communications Commission requirements.)

While space data centers represent a stated long-term objective, SpaceX and xAI have immediate priorities that differ significantly.

SpaceX is currently focused on demonstrating that its Starship rocket can transport astronauts to the Moon and Mars, while xAI is competing with leading AI firms such as Google and OpenAI. The pressure is so intense that, as reported by The Washington Post on Monday, Musk has relaxed restrictions on the company's chatbot Grok—resulting in its ability to generate AI-produced non-consensual adult and child sexual imagery.