Elon Musk creates AI-space giant with SpaceX-xAI merger

SpaceX has acquired artificial intelligence firm xAI, the companies announced on Monday, bringing together two of Elon Musk’s most ambitious ventures in a deal that creates what is now the world’s most valuable private company.

“This marks not just the next chapter, but the next book in SpaceX and xAI’s mission,” Musk said in a statement published on SpaceX’s website, as per CNN.

The merger highlights both the growing financial demands facing xAI as it competes in the rapidly expanding artificial intelligence sector and the increasing role AI is expected to play in the future of space exploration.

According to PitchBook, which tracks private company valuations, SpaceX was valued at $800 billion following a secondary share sale in December 2025, while xAI was valued at $230 billion after its most recent funding round in January.

The acquisition also reflects the intense push by major technology firms — including Musk’s own companies — to secure vast computing resources needed to fuel advances in artificial intelligence.

“Current advances in AI are dependent on large terrestrial data centres, which require immense amounts of power and cooling,” Musk wrote. “The only logical solution, therefore, is to transport these resource-intensive efforts to a location with vast power and space.”

AI data centres in orbit

As part of that vision, SpaceX last Friday sought approval from the Federal Communications Commission to deploy a massive constellation of 1 million satellites. The filing said the network would serve as solar-powered data centres designed to “accommodate the explosive growth of data demands driven by AI.”

Musk has estimated that within two to three years, “the lowest cost way to generate AI compute will be in space.”

His comments echo broader concerns across the tech industry about the surging energy needs of next-generation AI systems. NVIDIA chief executive Jensen Huang said last year that future AI models would require “100 times” more power than older versions. Goldman Sachs has projected that AI could drive a 165% increase in data centre electricity demand by 2030.

Major technology companies have already been spending heavily to meet that demand. Microsoft reported last week that it spent $37.5 billion in the final quarter of 2025 on capital expenditures, including data centres, while Meta disclosed spending $22.14 billion over the same period.

The rapid expansion of data centre infrastructure has also affected consumers. A Bloomberg News analysis last year found that in some areas near data centres, electricity costs rose by as much as 267% compared with five years earlier.

Controversies around xAI and Grok

Beyond energy concerns, xAI has faced scrutiny over its chatbot Grok, which operates on Musk’s social media platform X, also owned by xAI. The chatbot recently drew backlash for generating sexual images, primarily of women, including real individuals.

Last year, Grok was also criticised for producing violent and antisemitic content. The company apologised for those incidents, attributing them to a systems update.

Despite the controversies, investor enthusiasm for artificial intelligence remains strong. In January, xAI announced it had raised $20 billion from investors, including Fidelity Management & Research Company and the Qatar Investment Authority.

Overlapping operations and cultural questions

There was already significant overlap between SpaceX and xAI prior to the acquisition, with several employees working across both organisations. One example is Christopher Stanley, who has served as a principal security engineer at SpaceX since 2018 and as X’s senior director of security engineering since 2022.

However, some former xAI employees have publicly raised concerns about potential cultural clashes between the two companies.

“xAI prides itself on ‘move fast and break things,’ flat hierarchy, act first ask questions later. (It isn’t fully this, but tries to be) I have a hunch many xAI people will hit culture shock w/ SpaceX,” wrote Benjamin De Kraker, a former member of xAI’s human data team.

IPO plans and Musk’s growing fortune

Musk confirmed in December that SpaceX is planning an initial public offering. Founded in 2002, the company’s Wall Street debut has reportedly been valued at around $1.5 trillion, which would make it one of the largest IPOs in history — even before factoring in the merger with xAI.

Both SpaceX and xAI have consistently attracted large sums from investors eager to back their expansion plans. Going public would further increase their ability to raise capital.

Such a move could also significantly boost Musk’s already enormous personal wealth. According to Bloomberg’s real-time Billionaires Index, Musk is currently worth $676 billion, making him the richest person in the world. A combined public offering of SpaceX and xAI could drive that figure even higher.

By Tamilla Hasanova