SpaceX has merged with xAI, creating a $1.25 trillion company focused on establishing space-based data centers.
Elon Musk has merged his aerospace company SpaceX with his artificial intelligence startup xAI, resulting in the formation of the world's most valuable private company, valued at approximately $1.25 trillion.
The merger is primarily aimed at establishing data centers in space. Musk emphasized that advancements in artificial intelligence depend on substantial terrestrial data centers that consume extensive energy and resources, which he believes cannot sustainably meet global demand.
“Modern advancements in artificial intelligence rely on large terrestrial data centers that require vast amounts of energy and cooling...,” Musk noted.
Bloomberg reports that SpaceX is planning an initial public offering (IPO) in 2026, projecting its own valuation at $1 trillion and xAI's at $250 billion. Despite both companies facing financial hurdles, SpaceX reportedly has a stronger financial footing.
SpaceX garners about 80% of its revenue from launching Starlink satellites, reporting a profit of $8 billion from revenues between $15 billion and $16 billion in 2025. In contrast, xAI incurs costs of around $1 billion per month and has faced scrutiny after allowing inappropriate content generation on X.
Musk highlighted that the launch of satellites will be essential for the operation of these space-based data centers, significantly boosting cash flow for SpaceX. Earlier this year, the company sought approval from the U.S. Federal Communications Commission to launch a fleet of 1 million satellites, a figure likely inflated for negotiation purposes.
The ambitious project envisions a network of low Earth orbit data centers linked by laser channels, with Musk describing it as a step towards achieving a Type II civilization on the Kardashev scale.
“In my estimation, within two to three years, the most economical way to perform AI computations will be in space...,” he stated, predicting accelerated advancements in AI and technology.
Emerging Opportunities in Space
Space has become a promising frontier for data center operations, offering advantages like abundant sunlight and ample space for infrastructure. However, the significant costs associated with rocket launches remain a challenge.
Analysts from 33FG suggest that by 2030, AI computations in orbit could become economically feasible. Notably, Google is also exploring this domain, planning to establish a satellite network in low Earth orbit to utilize solar energy for powering data centers.
In addition to energy management, Google is collaborating with Commonwealth Fusion Systems to develop AI technologies for nuclear fusion, aiming to create a nearly limitless energy source.
In a strategic move, Google plans to enhance its AI capabilities significantly over the next five years, intending to increase its processing power by 1000 times.
Earlier this year, xAI completed a major acquisition of X, valuing the former at $80 billion and the latter at $33 billion after accounting for debt.
