Elon Musk has merged his SpaceX rocket company with his xAI startup, creating a powerhouse valued at $1.25 trillion. The deal sets SpaceX at $1 trillion and xAI at $250 billion, with a stock market flotation planned for June, aligning with Musk’s birthday and a rare planetary event.
Extending Consciousness to the Stars
Musk envisions this merger as a step toward extending ‘the light of consciousness to the stars.’ A core rationale involves shifting AI datacenters—the backbone of artificial intelligence—into space. Current AI relies heavily on ground-based facilities with massive energy needs, Musk argues. His solution: deploy up to a million solar-powered satellites to build orbital datacenters.
Feasibility of Space-Based Datacenters
Professors Julie McCann and Matthew Santer, co-directors of Imperial College London’s school of convergence science in space, security, and telecoms, view solar-powered orbital datacenters as a viable future option for AI firms. However, today’s satellites limit compute power, requiring a ‘planet-wide distributed computer’ of many interconnected units, much like Musk’s plan.
Challenges include maintaining seamless connections between satellites to mimic Earth-based datacenters while transmitting data downward. Additional hurdles involve solar radiation exposure and upkeep. ‘Datacenters on Earth receive constant maintenance—component failures are routine. Delivering parts to space proves complex and costly, demanding innovative installation methods,’ the professors note.
Musk projects these orbital facilities could add 100 gigawatts of AI capacity yearly, dwarfing the global total of about 59 gigawatts.
Vertically Integrated Innovation
In a message to staff, Musk described the combined entity as ‘the most ambitious, vertically integrated innovation engine on (and off) Earth.’ Analyst Dan Ives of Wedbush Securities highlights how the merger unites top space exploration and internet capabilities with leading datacenter expertise to deliver low-cost AI compute within two to three years.
Financial Dynamics and Competition
xAI, developer of the Grok AI tool and owner of the X social media platform, consumed $13 billion last year without a profitable legacy business like those of Meta, Amazon, Microsoft, or Google. Linking with SpaceX provides xAI superior access to funding and investors, says Ross Gerber, a Tesla and SpaceX investor.
‘Musk faces capital shortages for xAI amid rivals investing hundreds of billions in AI infrastructure. Merging with SpaceX appeals to investors drawn to its prospects,’ Gerber explains.
SpaceX generates revenue through reusable rocket launches for satellite deployments and International Space Station resupplies, plus its Starlink high-speed internet service. Recent estimates show $8 billion in profit on $15 billion to $16 billion in revenue last year.
Investor Concerns and Opportunities
Michael Sobel, president and co-founder of Scenic Management—a firm investing in private companies like Anthropic—notes the merger introduces complexity. ‘Integrating xAI’s heavy cash burn alters SpaceX’s financial profile instantly. Secondary markets favor simplicity, forcing deeper analysis of impacts on valuation and IPO timing,’ Sobel says. X’s regulatory and political challenges add further weight.
Yet, long-term investors see value: ‘This pairs the most advanced AI brain with the top hardware body, forming a $1.25 trillion stack from launchpad to neural network,’ Sobel adds.
Gerber welcomes the deal for X shareholders like himself, turning potential losses into SpaceX stakes. SpaceX investors may feel differently.
Looking Ahead to Bigger Mergers
Musk holds 44% of the expanded SpaceX and 17% of Tesla, where he serves as CEO. Speculation grows around combining SpaceX and Tesla. Ives sees a ‘growing chance’ of a unified Musk investment vehicle controlling the AI ecosystem. Gerber agrees: ‘Both firms hit $1.25 trillion now—perfect timing for a multitrillion-dollar powerhouse. It will happen.’
