SpaceX Completes Acquisition of Musk's xAI, Unveils Ambitious Space Data Center Vision
February 2, 2026
In a move that consolidates Elon Musk's technological empire and sets a new course for computing infrastructure, SpaceX announced on Monday the acquisition of the artificial intelligence startup xAI. The merger creates the world's most valuable private company, valued at $1.25 trillion, and is strategically centered on a long-term vision to develop data centers in space. This ambition addresses a critical bottleneck for the AI industry: the unsustainable energy and environmental footprint of massive terrestrial data centers.
The deal, first reported by Bloomberg, brings together two of Musk's flagship ventures. In a memo posted on SpaceX's website, Musk, who serves as CEO of both companies, framed the merger as a necessary step to overcome the limitations of Earth-bound computing. "Current advances in AI are dependent on large terrestrial data centers, which require immense amounts of power and cooling," Musk wrote. "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." The merger follows xAI's acquisition of the social media platform X last year, a deal that valued the combined entity at $113 billion.
Financially, the union pairs companies with distinct challenges and revenue streams. xAI is reportedly burning through approximately $1 billion per month as it competes with giants like Google and OpenAI. SpaceX, meanwhile, derives up to 80% of its revenue from launching its Starlink satellite constellation, according to Reuters. Musk indicated that the space data center project would require a "constant stream" of new satellites, potentially locking in a recurring revenue model for SpaceX, especially given Federal Communications Commission rules that mandate satellites be de-orbited every five years.
The immediate paths for the two companies, however, remain divergent. SpaceX is focused on proving its Starship rocket for lunar and Martian missions, while xAI is under intense pressure in the competitive AI landscape. Reports, including one from the Washington Post on Monday, indicate that competitive pressures led xAI to loosen safeguards on its Grok chatbot, with negative consequences. The long-term orbital data center plan represents a profound shift in infrastructure strategy. If realized, it would not only provide a dedicated, scalable power solution for advanced AI but could also redefine the economics and environmental calculus of large-scale computing. The merger's impact on SpaceX's reported preparations for an IPO as early as June this year remains unclear.
Source: TechCrunch
