Elon Musk is making good on rumors that he’s bringing several of his companies under one roof — the billionaire’s space company, SpaceX, has acquired xAI – his AI firm – creating a vertically integrated entity that combines rocket manufacturing, satellite networks, social media operations, and advanced AI capabilities under the same aegis. The merger, detailed in a statement on SpaceX’s website signed by Musk, forms what he described as “the most ambitious, vertically-integrated innovation engine on (and off) Earth,” encompassing rockets, space-based internet, direct-to-mobile communications, and the real-time information and free speech platform provided by X.
The transaction values the combined company at a staggering $1.25 trillion, with SpaceX at approximately $1 trillion and xAI at $250 billion, according to people familiar with the matter. The deal is structured as an all-stock acquisition, with xAI shareholders receiving SpaceX shares at an exchange ratio that reflects the relative valuations. Some xAI executives may have the option for cash instead of stock. SpaceX confirmed that the merger will not alter its plans for an initial public offering later in 2026, which could raise up to $50 billion and potentially become the largest IPO in history.
This comes at a time when Musk has been batting for the long-term necessity of space-based computing to address the escalating energy demands of AI. He argued that terrestrial data centers, reliant on massive power and cooling infrastructure, cannot sustainably meet global AI compute requirements without straining electricity grids and the environment. Musk projected that within two to three years, the lowest-cost AI processing would occur in orbit, harnessing abundant solar energy and vast space for scaling.
The goal includes deploying a new satellite constellation optimized for AI workloads, building on SpaceX’s experience with Starlink. Musk highlighted that even capturing a tiny fraction of the Sun’s energy output could provide exponentially more power than current global consumption. He stated that the capabilities unlocked by orbital data centers would fund and enable self-sustaining bases on the Moon, a full civilization on Mars, and eventual expansion across the universe. Still, not all news is sunny, and launching a million-satellite constellation would dramatically increase orbital congestion, requiring advanced deconfliction and debris mitigation. xAI also comes with a high burn rate—reportedly around $1 billion monthly.
Orbital data centers offer several compelling advantages over terrestrial ones, particularly for the extreme compute demands of modern AI. In space, solar power is abundant, constant (no night or weather interruptions), and free at scale, eliminating reliance on strained terrestrial grids and enabling vastly lower energy costs per computation. In addition to this, Physical space is virtually unlimited, allowing deployment of enormous server arrays without land acquisition, zoning, or environmental permitting battles. This is highly relevant to AI because training and inference of frontier models now require exaflop-scale compute and gigawatt-level power—demands that are rapidly outstripping global electricity generation capacity and are projected to consume a significant percentage of world energy within the next decade.
To provide some context, xAI, founded in 2023, develops the Grok family of large language models and operates the X platform following its acquisition last year. The company has pursued aggressive growth, including the construction of the Colossus supercomputer in Memphis, Tennessee, and has faced scrutiny over content moderation and AI-generated images (especially non-consensual expliciti images of women an d individuals) in recent times. SpaceX, already the world’s most valuable private company at roughly $800 billion in late 2025 secondary sales, dominates commercial space launches and operates Starlink, a constellation of thousands of satellites providing global broadband. The merger consolidates SpaceX’s launch capacity and satellite expertise, xAI’s AI models and compute demands, and X’s vast data resources for training and real-time applications.
The Tech Portal is published by Blue Box Media Private Limited. Our investors have no influence over our reporting. Read our full Ownership and Funding Disclosure →
