SpaceX, the rocket and satellite maker led by Elon Musk, said on Monday it had acquired xAI, the artificial intelligence company controlled by Mr. Musk.
The deal creates the most valuable private company in the world, worth more than $1 trillion, with a portfolio that includes rockets, xAI’s Grok chatbot, and the social media platform, X. The combined company will most likely move forward with an initial public offering around June, said two people familiar with the plan who spoke on condition of anonymity because the details weren’t public, in which Mr. Musk hopes to raise about $50 billion.
By merging the companies, Mr. Musk provided a financial lifeline to xAI, which has spent heavily to catch up in the race to develop A.I. And it gives potential investors in SpaceX’s public offering an opportunity to buy in on the A.I. boom, while allowing Mr. Musk a chance to realize his vision of building data centers, the computing sites for powering the technology, in space.
“SpaceX has acquired xAI to form the most ambitious, vertically-integrated innovation engine on (and off) Earth, with A.I., rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform,” Mr. Musk wrote in a memo addressed to some of his employees that was obtained by The New York Times. The billionaire cited the need to build data centers in space as one of the main drivers for the transaction.
The unusual arrangement demonstrates how Mr. Musk, the world’s richest man, increasingly thinks of his various businesses as interconnected, even if there are no obvious overlaps. Last year, he merged his social network X with xAI to consolidate the companies’ data, compute power and workforces. Now he’s taking an every bigger leap, merging the often troubled A.I. start-up with SpaceX, arguably the most successful private space company in the world.
Mr. Musk, in the memo sent to workers at SpaceX and xAI, described the combined operation with far-reaching language evoking science fiction tales of humanity conquering space and traveling through the galaxy. The merger also helps Mr. Musk, for whom Tesla shareholders recently approved a $1 trillion pay package, ensure that SpaceX grows in value on paper.
But it would take a leap of faith to understand how a company that combined social media with an A.I. chatbot will help SpaceX achieve what Mr. Musk has long described as its ultimate goal: taking humans to Mars.
Mr. Musk made a similar maneuver in 2016 when he used stock of his electric car company, Tesla, to buy SolarCity, a clean energy company where he was the largest shareholder and his cousin Lyndon Rive was chief executive. .
SpaceX confirmed the acquisition on its website and shared Mr. Musk’s memo. Representatives for SpaceX and xAI did not immediately return requests for comment. Mr. Musk did not immediately respond to an emailed request for comment.
While Tesla, Mr. Musk’s automaker, is a publicly traded company that must disclose its finances and other information to shareholders, most of Mr. Musk’s companies are privately held and more opaque. Because of that, he doesn’t need to seek stakeholder approval for many of his business decisions.
His private companies include SpaceX; the Boring Company, a tunneling start-up; and Neuralink, a brain interface company. Mr. Musk often moves resources and employees among his companies, defying traditional business norms and operating his various companies as one big Musk enterprise.
“Ultimately, it’s likely there will be one Musk Inc. at the end,” said Peter Diamandis, the founder of the XPrize Foundation, a nonprofit focused on fostering technological development. Mr. Diamandis, who is also an investor in SpaceX and xAI, said he always believed Mr. Musk’s vision was to merge his companies together.
In December, SpaceX said it would allow employees to sell shares at a price that would value the company at around $800 billion ahead of the potential public offering later this year. In January, xAI announced it had raised $20 billion, which valued the company at more than $230 billion. SpaceX invested $2 billion in xAI last year, the same amount Tesla said it agreed to invest last month.
Reuters first reported on merger talks between the two companies.
The combination of SpaceX, a major government contractor, and xAI carries some reputational risk. Mr. Musk’s chatbot, Grok, is the subject of several international investigations after it produced a spree of nonconsensual nude images last month. And world leaders have fretted about the political influence Mr. Musk wields through Starlink, the satellite internet provider owned by SpaceX.
Mr. Musk has said he plans to use SpaceX to send data centers to orbit, where there are no land constraints and closer proximity to the sun for solar energy.
In a letter to shareholders last year, SpaceX said that its potential public offering would be used partly to raise money for projects including “A.I. data centers in space.” Still, there are current technical and physical limitations to that idea, experts have said.
“My estimate is that within 2 to 3 years, the lowest cost way to generate A.I. compute will be in space,” Mr. Musk wrote in his memo to SpaceX and xAI employees. “This cost-efficiency alone will enable innovative companies to forge ahead in training their A.I. models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and invention of technologies that benefit humanity.”
SpaceX, which builds self-landing rockets and satellites, was not previously focused on developing space data centers, according to three former executives who spoke with The New York Times. Mr. Musk started posting on X about the idea in early November, saying in one post that “serious A.I. scaling” had to “be done in space.”
Last week, SpaceX told the Federal Communications Commission that it has plans to launch an “orbital data center system” that could consist of as many as a million satellites, according to a filing. The system would “maximize the time during which these satellites can generate solar power and to meet the rapidly evolving global A.I. compute needs,” the filing said.
SpaceX did not include details on when it planned to launch the satellites, nor details on their size or design. The European Space Agency estimates there are fewer than 17,000 satellites currently orbiting the Earth.
“The capabilities we will 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,” Mr. Musk said in his memo, which does not mention the company’s public offering plans.
Daniel Hanson, a portfolio manager at the investment firm Neuberger Berman who oversees a fund with a $200 million investment in SpaceX, did not expect space data centers to be part of the company’s near-term business efforts. But he called SpaceX’s tie-up with xAI a “vertical integration that can be a competitive advantage.”
“I’m sure they’ve measured three times before they cut,” Mr. Hanson said of Mr. Musk’s plans.
Others were more skeptical. Ross Gerber, the chief executive of Gerber Kawasaki Wealth and Investment Management, which is invested in several companies led by Mr. Musk, suggested the reason for a merger was financial.
“X was out of money. Merged with xAI. xAI out of money merge with SpaceX. SpaceX out of money. Merge with …. Tesla,” Mr. Gerber posted on Monday morning before the merger was announced.
Lauren Hirsch contributed reporting.
Ryan Mac covers corporate accountability across the global technology industry.
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