Elon Musk announced on Monday that SpaceX has acquired his startup xAI, which focuses on artificial intelligence, in a record-breaking mega-merger. The merger unites Musk's ambitions in the fields of artificial intelligence and space exploration, bringing together the rocket and satellite company with the creator of the Grok chatbot.
The deal represents one of the most ambitious connections in the technology sector. It brings together a space technology and defense contractor with a rapidly growing artificial intelligence developer whose costs are largely driven by chips, data centers, and energy.
It could also bolster SpaceX's ambitions in the data center space, as Musk competes in the artificial intelligence sector with rivals such as Alphabet's Google, Meta, Amazon-backed Anthropic, and OpenAI.
According to a source familiar with the matter, SpaceX is valued at $1 trillion and xAI at $250 billion.
Investors in xAI will receive 0.1433 SpaceX shares for each xAI share as part of the acquisition, the source said. Some xAI executives may opt for cash of $75.46 per share instead of SpaceX shares.
"This is not just another chapter, but another book in the mission of SpaceX and xAI: scaling up to create a sentient sun to understand the universe and spread the light of consciousness to the stars," Musk said.
Record acquisition
The purchase of xAI sets a new record in global mergers and acquisitions, which had been held for more than a quarter of a century by Vodafone when it took over the German company Mannesmann in a hostile takeover in 2000. LSEG [a global financial group that provides infrastructure and services for financial markets, editor's note] estimates the value of the transaction at $203 billion.
One share of the company formed by the merger of SpaceX and xAI is expected to be worth approximately $527, according to another source familiar with the acquisition. The merger comes at a time when the space company is planning a large public offering this year that could value it at more than $1.5 trillion, two well-informed sources said.
SpaceX wants to launch a million satellites to power AI
SpaceX recently applied for permission to launch a million satellites into Earth's orbit to power artificial intelligence. The application states that "orbital data centers" are the most cost- and energy-efficient way to meet the growing demand for AI performance.
Traditionally, such centers are large warehouses with powerful computers that process and store data. Musk's company SpaceX claims that the terrestrial capacity of data centers is no longer sufficient to meet the demand for AI use. This was reported by the BBC.
The launch of a million SpaceX satellites would dramatically increase their number in orbit. Musk's Starlink network, with nearly 10,000 satellites, is already being accused of overloading Earth's orbits, which the billionaire denies. The new network could consist of up to one million solar-powered satellites, according to an application accepted by the US Federal Communications Commission last Friday in January.
"The satellites will actually be so far apart that it will be difficult to see from one to another. Space is so vast that it exceeds the limits of human comprehension," Musk wrote on his social network X.
Similar to the Starlink network satellites, which provide high-speed internet, the orbital data center satellites would operate in low Earth orbit at altitudes ranging from 500 to 2,000 kilometers. SpaceX claims that such data centers would be a more environmentally friendly alternative to traditional centers, which require enormous amounts of energy to operate and large amounts of water for cooling.
Musk's "Muskonomy"
The aforementioned mega-merger of SpaceX and xAI consolidates Musk's vast business empire and assets into a tighter, mutually reinforcing ecosystem — which some investors and analysts informally call "Muskonomy."
Among other things, this ecosystem includes Tesla, neural chip manufacturer Neuralink, and The Boring Company, an American technology and engineering firm that has been focusing on building underground tunnels since 2016 to alleviate traffic congestion in cities and streamline urban transportation.
"Starlink has already been a cash flow engine, and now it's adding a layer of AI revenue while becoming a distribution platform for AI services and data," said Ali Javaheri, senior analyst for emerging markets at analytics and data company PitchBook.
"With policy changes allowing the use of certain customer data to train models and the prospect of orbital data centers, SpaceX is presenting itself as an integrated infrastructure platform that can serve commercial and government purposes, creating a much stronger narrative toward a public offering."
Regulatory attention
The world's richest man already has a history of merging his businesses. Last year, Musk linked the social media platform X with xAI through a stock swap, giving the artificial intelligence startup access to the platform's data and distribution. In 2016, he used Tesla shares to buy his solar energy company SolarCity.
The deal could attract the attention of regulators and investors in the areas of governance, valuation, and conflicts of interest, given Musk's overlapping leadership positions in multiple companies, as well as the potential transfer of engineers, proprietary technologies [technology developed by a company for its own use or sale, to which others do not have full access, editor's note], and contracts between entities.
SpaceX also has billions of dollars in federal contracts with NASA, the Department of Defense, and intelligence agencies, all of which have the authority to review mergers and acquisitions in terms of national security and other risks.
(reuters, bbc, im)