SpaceX has officially acquired the artificial intelligence firm xAI, founded by Elon Musk, marking a significant moment in the tech industry as the merger creates the world’s most valuable private company. The announcement was made on Monday, revealing plans for innovative space-based data centers that Musk has been passionate about developing in recent months.
Musk outlined in a memo on the SpaceX website that traditional terrestrial data centers, essential for current AI advancements, demand enormous energy and active cooling systems. He expressed concerns about the environmental impact and community strain caused by these centers, referencing xAI’s struggles with similar issues at its facility in Memphis, Tennessee.
The merger, valued at approximately $1.25 trillion, was first reported by Bloomberg News. Speculation regarding SpaceX’s potential initial public offering (IPO) has been rampant, but Musk did not clarify in his memo how the acquisition might influence that timeline.
Bringing together two of Musk’s ventures comes amidst financial hurdles; xAI reportedly incurs about $1 billion in losses monthly. In contrast, SpaceX garners up to 80% of its revenue from launching its Starlink satellites, as per Reuters. Last year, xAI also acquired the social media platform X, also owned by Musk, with an estimated combined valuation of $113 billion.
Musk highlighted that establishing these space-based data centers will necessitate a robust satellite network, which could provide a continuous income stream for SpaceX. This is especially relevant considering the Federal Communications Commission mandates that satellites must be de-orbited every five years.
Despite the ambitious plans for space data centers, SpaceX and xAI’s immediate objectives diverge significantly. SpaceX is focused on demonstrating its Starship rocket’s potential to transport astronauts to the moon and Mars, while xAI seeks to enhance its position against established AI giants like Google and OpenAI. Recent pressure on xAI has led Musk to relax restrictions on its chatbot, Grok, despite concerns about its misuse.
Musk, noted for his leadership of Tesla, The Boring Company, and Neuralink, previously invested $2 billion from both Tesla and SpaceX into xAI.
