In a memorandum posted on the SpaceX website on February 2, 2026, Elon Musk - CEO of SpaceX - said that the merger mainly serves the plan to build data centers located in outer space, an idea he has been pursuing strongly recently.
According to Musk, the current development of AI depends on large-scale data centers on the ground, which require huge amounts of electricity and cooling systems.
He believes that the global electricity demand for AI cannot be met by ground solutions in the short term without significant pressure on the community and the environment. Previously, xAI was criticized for its environmental and social impacts surrounding the company's data centers in Memphis, Tennessee.
According to Bloomberg News, the first unit to report the deal was completed, the merged company is valued at about 1,250 billion USD. SpaceX is said to be preparing plans to conduct an initial public offering (IPO) earliest in June this year, but it is not yet clear whether this deal will affect that roadmap. Mr. Musk did not mention the IPO in the public memorandum.
The merger brings Musk's two companies, each facing its own financial challenges, into a common ecosystem. Bloomberg said xAI is currently costing about $1 billion per month. Meanwhile, according to Reuters, SpaceX generates up to 80% of revenue from launching Starlink satellites owned by the company itself.
Last year, xAI acquired X, a social networking platform also owned by Mr. Musk, with the announced consolidated company valuation of $113 billion.
In the memorandum, Mr. Musk said that building outer space data centers will require a series of satellites being deployed continuously, although the specific number was not specified. This means SpaceX will have an additional stable and long-term revenue source in the future. According to regulations of the US Federal Communications Commission (FCC), satellites must be removed from orbit after a maximum of 5 years of operation.
Although the long-term goal is outer space data centers, SpaceX and xAI are currently pursuing very different short-term priorities. SpaceX is focusing on proving the capacity of the Starship rocket to put humans on the moon and Mars. Meanwhile, xAI must compete directly with leading AI corporations such as Google and OpenAI.
Competition pressure on xAI is said to be very high. According to the Washington Post, Elon Musk recently eased restrictions on his company's chatbot Grok, a move that is said to contribute to the tool being exploited to create unapproved pornographic image content.
In addition to SpaceX and xAI, Elon Musk currently also manages Tesla, The Boring Company and Neuralink. Previously, Tesla and SpaceX each invested 2 billion USD in xAI.
