Musk Merges SpaceX and xAI in Sweeping Empire Consolidation, Eyes Orbital Data Centers

In a move that reshapes the landscape of both the aerospace and artificial intelligence industries, Elon Musk is merging SpaceX with his AI startup xAI. The acquisition, confirmed by sources to Business Insider and outlined in a company-wide memo from Musk on Monday, signals a profound strategic pivot as the billionaire consolidates his sprawling business interests under a unified vision for an AI-driven future.

"We are creating the most ambitious, vertically-integrated innovation engine on and off Earth," Musk declared in the memo, which was later published online. He described a combined entity encompassing AI development, rocket launches, space-based internet via Starlink, direct-to-device communications, and what he termed "the world's foremost real-time information and free speech platform," referring to X (formerly Twitter).

The merger arrives as SpaceX reportedly prepares for a blockbuster initial public offering later this year, with potential valuations soaring as high as $1.5 trillion. For xAI—founded by Musk in 2023 to rival OpenAI and Google—the deal provides a crucial lifeline of capital and infrastructure. The AI firm, recently valued at $230 billion after a $20 billion funding round, has reportedly burned through billions and faced global controversy over outputs from its Grok chatbot.

Critically, Musk framed the union as enabling a leap toward "orbital data centers." He reiterated a long-held ambition to launch computing infrastructure into space, where it could harness solar power more efficiently. This vision gained tangible momentum last week when SpaceX filed a request with the Federal Communications Commission (FCC) for permission to launch up to one million satellites to serve as such orbital nodes.

This consolidation is the latest in a series of maneuvers tightening the links between Musk's companies. In March 2025, xAI acquired the social media platform X. SpaceX and Tesla have each invested $2 billion in xAI in recent months. The deal, first reported by Reuters in January, underscores Musk's intent to funnel resources from his profitable ventures into his grand AI and spacefaring ambitions.

Reactions & Analysis:

"This is a logical, if audacious, step," said Dr. Anya Sharma, a tech industry analyst at the Stanford Center for AI Policy. "Musk is effectively building a closed-loop ecosystem: data from X and Starlink users trains xAI models, which are then hosted on SpaceX's proposed space-based cloud. It's vertical integration on a cosmic scale, though the regulatory and technical hurdles are staggering."

"It's a masterstroke of financial engineering," noted Marcus Thorne, a venture capitalist with Helios Partners. "The IPO-bound SpaceX absorbs xAI, instantly boosting its 'AI premium' for public market investors. This provides xAI with almost limitless capital while sidestepping the intense scrutiny a standalone xAI IPO would face, especially after its recent controversies."

"This isn't innovation; it's a monopoly-in-the-making wrapped in sci-fi jargon," fired Elena Voss, co-director of the watchdog group Tech Transparency Now. "Musk is merging companies drowning in controversy—from AI-generated harmful content to satellite clutter—using one to bail out the other. He's creating a 'too big to fail' entity that could evade terrestrial regulation by literally aiming for the stars. The FCC must scrutinize this satellite data center plan with extreme prejudice."

The merger positions the combined SpaceX-xAI entity at the center of multiple high-stakes races: the development of artificial general intelligence (AGI), the build-out of space infrastructure, and the quest for a sustainable, high-power computing paradigm. Whether it marks a visionary leap or a consolidation of unchecked power will likely define the next chapter of Musk's industrial empire.

Business Insider's original reporting contributed to this article.