With SpaceX-xAI merger, Elon Musk wants to set up AI data centres in space

Elon Musk has announced that his aerospace firm, SpaceX, has acquired his AI startup, xAI. This deal brings Musk’s AI firm within the gambit of the space exploration company, which he says, would allow more accelerated innovation and progress for humanity. Reports indicate that this could be a precursor to a SpaceX IPO at a valuation of over $1 trillion.

Elon Musk calls SpaceX the most ambitious innovation engine for humanity

The tech billionaire shared the update on SpaceX’s official website with the title, “xAI joins SpaceX to Accelerate Humanity’s Future.” According to Musk, this acquisition would create “the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform”.

This consolidation is seen as a significant step in Musk’s broader vision to integrate his technology ventures and challenge leading AI competitors like Alphabet, Meta, Amazon-backed Anthropic, and OpenAI.

Elon Musk’s SpaceX may be eyeing a $1.5 trillion IPO

Following the transaction, Reuters reports that SpaceX is now valued at $1 trillion, and the combined company is expected to price shares at about $527 each, based on information from individuals familiar with the negotiations. The value of xAI in this deal is said to be at $250 billion.

The acquisition comes as SpaceX prepares for a potential public offering later this year that could see its valuation exceed $1.5 trillion. The previous record for the world’s largest M&A deal, Vodafone’s 2000 takeover of Mannesmann, was valued at $203 billion. xAI itself was valued at $230 billion in November after a major fundraising round, according to the Wall Street Journal.

SpaceX will acquire xAI’s properties, including the Grok chatbot and the social media platform X. Musk has recently increased ties between his businesses through a series of deals, including xAI’s acquisition of platform X in early 2025 and Tesla’s $2 billion investment in xAI last month. This move further tightens what some analysts call the "Muskonomy," with cross-company ties spanning Tesla, Neuralink, the Boring Company, and now a unified AI-space venture.

Elon Musk wants AI data centres in space

A central part of the rationale for the merger is Musk’s plan to develop space-based data centers, powered by solar satellites, to support the growing computing needs of artificial intelligence. He explained, “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.”

Instead, AI data centres in space would allow for more compute power, without pushing the limits of energy production on Earth. He added, “In the long term, space-based AI is obviously the only way to scale.”

This space AI data centre network could span a million satellites according to Elon Musk. These satellites would depend on solar energy, and could bring humanity a step closer to reaching level II on the Kardashev scale. He said, “Launching a constellation of a million satellites that operate as orbital data centers is a first step towards becoming a Kardashev II-level civilisation, one that can harness the Sun’s full power, while supporting AI-driven applications for billions of people today and ensuring humanity’s multi-planetary future.”

The Kardeshev scale is a method proposed by Soviet astronomer Nikolai Kardashev in 1964, which measures a civilisation's technological advancement based on the total amount of energy it can harness. A type II civilisation refers to a society which can harness complete energy of its star. Currently humanity is said to be at around 0.73 in this scale.