Elon Musk Merges xAI And SpaceX To Launch AI Data Centers In Space

TLDR

• Elon Musk’s SpaceX has acquired his AI company xAI
• The merged company is expected to IPO at $1.25 trillion
• xAI’s Grok chatbot has been under regulatory scrutiny
• Musk said AI must move to space to meet future energy needs

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Elon Musk’s rocket company SpaceX has merged with his artificial intelligence company xAI. The merger was confirmed by SpaceX through a memo posted online, which included a message from Musk. He described the move as a step toward uniting artificial intelligence, rockets, media, and internet infrastructure under one organization.

According to sources familiar with the matter, the deal values SpaceX at $1 trillion and xAI at $125 billion. Bloomberg reported the merged company could go public at a valuation of $1.25 trillion, making it the most valuable private firm preparing for an IPO.

SpaceX to take charge of AI operations through xAI acquisition

The memo shared by Musk referred to the merger as an “innovation engine.” He wrote, “Space-based AI is obviously the only way to scale.” He explained that current AI models depend on Earth-based data centers that consume large amounts of power and cooling. These resources are becoming difficult to sustain.

Musk stated, “Global electricity demand for AI simply cannot be met with terrestrial solutions.” He added that the combined company would focus first on launching AI satellites. These satellites are expected to host data centers in space, using solar energy to power advanced AI systems.

xAI raised billions before the merger and is known for Grok chatbot

xAI was launched in 2023 and initially operated within Musk’s social media platform X, formerly Twitter. It was later incorporated as an independent company and raised billions in funding. Tesla invested $2 billion in xAI, despite concerns from shareholders.

The company’s main product is Grok, a chatbot that has received attention for its image generation tools. In January 2026, regulators in the UK and EU opened investigations into its misuse. xAI responded by placing limits on how users can edit images generated by Grok.

The merger now places Grok under the same structure as SpaceX, aiming to use both software and hardware to drive space-based AI.

IPO preparations underway as Musk consolidates ventures

Experts believe the merger may be part of broader plans for a public offering. Emily Zheng, senior analyst at Pitchbook, said, “The sheer cost of compute, infrastructure, and energy is why many top startups like SpaceX are preparing to go public.”

Bringing xAI into SpaceX may help the merged company present itself as efficient and ready for public investors. The consolidation also reduces overlap between Musk’s companies.

Musk said, “The capabilities we unlock by making space-based data centers a reality will fund and enable self-growing bases on the Moon, an entire civilization on Mars, and ultimately expansion to the Universe.”

With this move, only Neuralink and The Boring Company remain outside of Musk’s major business consolidations. This step marks another effort to align all his ventures toward long-term goals in AI and space.

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