SpaceX acquires xAI for $125bn as Musk bets AI compute will move to space within 3 years

Elon Musk has confirmed that SpaceX has acquired his artificial intelligence startup, xAI. The move brings AI, rockets, satellite internet, and media platforms under a single corporate umbrella.

SpaceX confirmed the acquisition in a memo posted to its website, authored by Musk himself. While financial terms were not officially disclosed, the deal is believed to value xAI at approximately $125bn (£91bn) and SpaceX at around $1tn, a figure that would make SpaceX the most valuable private company in history.

In the memo, Musk described the merger as the creation of an “innovation engine,”.

Musk wrote, “SpaceX has acquired xAI to form 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 marks not just the next chapter, but the next book in SpaceX and xAI’s mission: scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars!

“Current advances in AI are dependent on large terrestrial data centers, which require immense amounts of power and cooling. 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.

“By directly harnessing near-constant solar power with little operating or maintenance costs, these satellites will transform our ability to scale compute. It’s always sunny in space! Launching a constellation of a million satellites that operate as orbital data centers is a first step towards becoming a Kardashev II-level civilization, 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.

“In the history of spaceflight, there has never been a vehicle capable of launching the megatons of mass that space-based data centers or permanent bases on the Moon and cities on Mars require. Even in 2025, the most prolific year in history in terms of the number of orbital launches, only about 3000 tons of payload was launched into orbit, primarily consisting of Starlink satellites carried by our Falcon rocket.

“This year, Starship will begin delivering the much more powerful V3 Starlink satellites to orbit, with each launch adding more than 20 times the capacity to the constellation as the current Falcon launches of the V2 Starlink satellites. Starship will also launch the next generation of direct-to-mobile satellites, which will deliver full cellular coverage everywhere on Earth.

“While the need to launch these satellites will act as a similar forcing function to drive Starship improvements and launch rates, the sheer number of satellites that will be needed for space-based data centers will push Starship to even greater heights. With launches every hour carrying 200 tons per flight, Starship will deliver millions of tons to orbit and beyond per year, enabling an exciting future where humanity is out exploring amongst the stars.

“The basic math is that launching a million tons per year of satellites generating 100 kW of compute power per ton would add 100 gigawatts of AI compute capacity annually, with no ongoing operational or maintenance needs. Ultimately, there is a path to launching 1 TW/year from Earth.

“My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space. This cost-efficiency alone will enable innovative companies to forge ahead in training their AI models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and invention of technologies to benefit humanity.”

xAI’s absorption into SpaceX marks the culmination of a consolidation process that has been unfolding over the past two years. The AI company originated as a division within X, formerly Twitter, after Musk acquired the social media platform in 2022. X’s vast stream of real-time text and user data became the foundation for training xAI’s flagship product, the Grok chatbot.

By early 2025, xAI had been spun out as an independent company and was soon valued more highly than X itself. In a subsequent all-stock deal, xAI acquired the social media platform, with Musk stating at the time that the combination would unite “data, models, compute, distribution and talent.” The SpaceX merger now extends that logic into the physical realm of launch systems, satellites, and orbital infrastructure.

The deal also follows Tesla’s announcement last month that it had invested $2bn into xAI, despite vocal opposition from some shareholders. In a prior vote, abstentions and votes against the idea outweighed approvals, reflecting ongoing concerns about conflicts of interest and capital allocation across Musk’s businesses.

Industry analysts view the xAI acquisition as another signal that SpaceX is positioning itself for an eventual initial public offering (IPO).

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