Musk Merges SpaceX and xAI, Creating a Colossus Poised to Power AI from Orbit

In a move that reshapes the frontiers of both technology and space exploration, Elon Musk's SpaceX announced Monday it has acquired artificial intelligence firm xAI. The merger unites two of the world's most valuable private companies under a singular, audacious vision: to power the next generation of AI not from Earth, but from orbit.

"This isn't merely a step forward; it's a leap into a new paradigm," Musk stated in a release. "The constraints of terrestrial data centers—their immense power draw, land use, and cooling needs—are becoming a bottleneck for AI's future. The solution lies in the vast resources of space."

The financial scale of the deal is staggering. Prior to the merger, SpaceX was valued at approximately $800 billion, with xAI pegged at around $230 billion, according to data from PitchBook. The combined entity instantly becomes the most valuable private company globally, with its sights set on a public offering that could approach a $2 trillion valuation.

The strategic rationale extends beyond balance sheets. The AI industry is grappling with an existential challenge: its insatiable hunger for computing power and energy. As noted by analysts from Goldman Sachs, AI is projected to increase data center power demand by 165% by 2030. Tech giants like Microsoft and Meta are already spending tens of billions quarterly on infrastructure.

Musk's proposed solution is characteristically extraterrestrial. Just days before the acquisition announcement, SpaceX filed with the FCC for permission to launch a constellation of up to one million satellites. The stated goal is to create a network of orbital, solar-powered data centers to "accommodate the explosive growth of data demands driven by AI." Musk estimates space-based computing could become the lowest-cost option within two to three years.

However, the merger raises complex questions. xAI, which also operates the social platform X, has faced criticism over its Grok AI's output, including generating non-consensual intimate imagery and hateful content. Integrating this culture with SpaceX's rigorous, safety-critical aerospace engineering ethos may prove challenging. Former xAI employee Benjamin De Kraker previously warned of potential "culture shock" for xAI staff moving to SpaceX's more structured environment.

Furthermore, the push for AI compute has tangible earthly consequences. A Bloomberg analysis found electricity costs near data centers have skyrocketed by as much as 267% in five years, a burden passed to consumers.

Despite these concerns, investor appetite remains voracious. xAI secured $20 billion in funding earlier this year from major institutions, signaling strong confidence in Musk's integrated vision. The merger positions the new conglomerate to dominate the converging sectors of space infrastructure and advanced artificial intelligence, potentially redefining the technological landscape for decades to come.

Reactions & Analysis

Dr. Aris Thorne, Tech Ethicist at Stanford: "This is a vertical integration of ambition on a scale we've never seen. While the engineering vision is compelling, it creates a concerning concentration of power—over AI development, space access, and data. Regulatory bodies are decades behind in understanding the implications."

Maya Chen, Partner at Horizon Ventures: "From an investment standpoint, this is brilliant. It solves a critical path problem for AI—energy—while leveraging SpaceX's core competency. This merger isn't about cost-saving; it's about creating an unassailable competitive moat. The IPO will be historic."

David R. Feldspar, former FCC advisor and policy advocate: "It's a dystopian fantasy wrapped in a press release. We're seeing our power bills explode and our digital spaces polluted by harmful AI from these very companies, and Musk's answer is to launch a million new satellites to clutter the heavens? This isn't innovation; it's a reckless monopoly play that externalizes all real-world costs onto the public and the planet."

Captain Lena Rodriguez (Ret.), NASA Aerospace Engineer: "The technical synergy is undeniable. Space-based computing for deep-space missions and Mars colonization has been a theoretical goal for years. If anyone can force it into reality, it's this combined team. My worry is the breakneck 'move fast' culture of AI crashing into the 'measure twice, cut once' world of crewed spaceflight."

Reporting contributed by Clare Duffy, Lisa Eadicicco, Hadas Gold, Jackie Wattles and Matt Egan.