SpaceX acquired Elon Musk’s xAI on Monday, forming the world’s most valuable private company valued at $1.25 trillion. Musk, SpaceX CEO, detailed the merger in a memo on the company’s website to pursue space-based data centers.
Musk explained that the acquisition centers on developing data centers in space, a concept he has pursued intensely for recent months. This move combines two Musk-led enterprises under SpaceX, aligning their resources toward innovative infrastructure solutions.
Musk stated in the memo that current advances in AI depend on large terrestrial data centers requiring immense amounts of power and cooling. He wrote, “Global electricity demand for AI simply cannot be met with terrestrial solutions, even in the near term, without imposing hardship on communities and the environment.”
xAI has faced accusations of contributing to such hardship through its data centers in Memphis, Tennessee, where local communities report impacts from operations.
Bloomberg News first reported the completed deal and the $1.25 trillion valuation of the combined entity. SpaceX has prepared for an initial public offering as early as June this year. The memo from Musk did not reference the IPO, leaving unclear any potential impact from the merger on that schedule.
The merger unites companies with distinct financial profiles. xAI currently expends approximately $1 billion per month, as reported by Bloomberg. In contrast, SpaceX generates up to 80 percent of its revenue from launching Starlink satellites, according to Reuters.
Previously, in the last year, xAI acquired X, Musk’s social media company. Musk claimed the combined valuation of xAI and X reached $113 billion following that transaction.
Musk detailed in the memo that establishing space-based data centers will require a constant stream of many satellites, though he did not specify the exact number. This ongoing satellite deployment ensures SpaceX an even larger constant revenue stream for the foreseeable future.
Federal Communications Commission regulations mandate that satellites be de-orbited every five years, which sustains demand for replacement launches and reinforces SpaceX’s revenue cycle from these operations.
Although space data centers represent the long-term objective outlined in the merger, SpaceX and xAI maintain different near-term objectives in their respective operations.
