SpaceX has acquired Elon Musk’s artificial intelligence startup xAI, creating the world’s most valuable private company, the spaceflight company announced Monday.
Musk, who is also the CEO of SpaceX, wrote in a note posted on the rocket company’s website that the merger is largely about creating space-based data centers — an idea it has been fixated on in recent months.
“Current AI developments depend on large terrestrial data centers, which require massive amounts of power and cooling. The global electricity demand for AI simply cannot be met by terrestrial solutions, even in the short term, without imposing hardship on communities and the environment,” he wrote. (xAI has been accused of imposing some of these difficulties in the communities near its data centers in Memphis, Tennessee.)
The deal values the combined company at $1.25 trillion, according to Bloomberg News, which first reported report the fullmd agreement. SpaceX is reportedly preparing an IPO for June of this year. It’s unclear whether the merger will affect that timeline. Musk did not mention the IPO in his public memo.
The merger brings together two of Musk’s companies, each with their own financial challenges. xAI is currently on fire about $1 billion a monthaccording to Bloomberg. SpaceX, meanwhile, generates up to 80% of its revenue from launching its own Starlink satellites, according to Reuters. Last year, xAI acquired Xthe social media company also owned by Musk, with Musk claiming a total company value of $113 billion.
Musk wrote in his memo that it will take a steady stream of many — though he didn’t specify how many — satellites to build those space data centers, ensuring SpaceX will have an even bigger steady stream of revenue for the foreseeable future. (This revenue cycle probably looks even more attractive when you consider that satellites must be derailed every five years by the Federal Communications Commission.)
While space data centers may be the stated goal, SpaceX and xAI have very different short-term goals.
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SpaceX is currently trying to prove that its Starship rocket is capable of carrying astronauts to the Moon and Mars, while xAI is competing against leading AI companies such as Google and OpenAI. The pressure on xAI is so great, the The Washington Post reported Mondaythat Musk loosened restrictions on the company’s Grok chatbot — which helped make it a tool for AI-generated non-consensual sexual images of adults and children.
Musk also heads Tesla, The Boring Company and Neuralink. Tesla and SpaceX previously invested $2 billion each in xAI.
