Elon Musk’s SpaceX officially acquires Elon Musk’s xAI, with plan to build data centers in space

SpaceX has officially acquired xAI, the artificial intelligence company founded by Elon Musk, creating what is now the world's most valuable private company. The spaceflight company announced the completed acquisition on Monday.

Musk, who serves as CEO of SpaceX, explained in a memo published on the company's website that the primary motivation behind the merger is the development of space-based data centres — an idea he has increasingly emphasised over the past several months.

"Current advances in AI are dependent on large terrestrial data centres, which require immense amounts of power and cooling. Global electricity demand for AI cannot be met with terrestrial solutions, even in the near term, without imposing hardship on communities and the environment," Musk wrote. He did not address the criticism that xAI has already been accused of imposing some of those hardships on communities near its data centres in Memphis, Tennessee.

The transaction values the combined SpaceX–xAI entity at approximately $1.25 trillion, according to Bloomberg News, which first reported that the deal had been finalised. SpaceX has reportedly been preparing for a potential initial public offering as early as June of this year, though it remains unclear whether the acquisition will impact that timeline. Musk did not reference a possible IPO in his memo.

The merger unites two Musk-led companies that face distinct financial pressures. According to Bloomberg, xAI is currently burning roughly $1 billion per month. SpaceX, meanwhile, derives as much as 80% of its revenue from launching and operating its own Starlink satellites, based on figures reported by Reuters. Last year, xAI also acquired X, the social media company owned by Musk, with Musk claiming the combined valuation of that deal was $113 billion.

In his memo, Musk noted that building space-based data centres would require a continuous flow of satellites, though he did not specify an exact number. That requirement would, in effect, guarantee SpaceX a steady stream of revenue well into the future. The model becomes even more appealing, given that the Federal Communications Commission requires satellites to be de-orbited after five years of operation.

Despite the shared long-term vision for space-based infrastructure, SpaceX and xAI are pursuing significantly different short-term goals. SpaceX is focused on demonstrating that its Starship rocket can safely transport astronauts to the Moon and eventually to Mars. At the same time, xAI is racing to compete with leading artificial intelligence companies such as Google and OpenAI.

The competitive pressure on xAI has reportedly been intense. The Washington Post reported Monday that Musk loosened safeguards on xAI's chatbot Grok. This decision contributed to the tool being used to generate nonconsensual sexual imagery involving both adults and children.

Beyond SpaceX and xAI, Musk also leads Tesla, The Boring Company, and Neuralink. Both Tesla and SpaceX previously invested $2 billion each into xAI, further tying Musk's portfolio of companies together as he pushes toward increasingly ambitious technological and infrastructure projects.