Elon Musk to combine SpaceX and xAI businesses ahead of IPO

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Elon Musk is combining his space exploration and artificial intelligence ventures into a single company, SpaceX announced Monday, positioning the restructuring ahead of what the billionaire’s plans appear to include for a major initial public offering later this year. The Associated Press reported that SpaceX said it had bought xAI as part of the move to bring multiple Musk-linked technology businesses under one corporate umbrella.

SpaceX said the deal would merge offerings that include its satellite communications company Starlink and Musk’s social media platform X, as well as the artificial intelligence product Grok. The AP reported that SpaceX presented the combination as a way to unify Musk’s rocket and AI operations, rather than keeping them as separate corporate tracks.

Musk has long argued that developing AI compute in space could address costs on Earth, including electricity and other resources required to build and run AI systems. In the announcement posted on SpaceX’s website, Musk wrote that “In the long term, space-based AI is obviously the only way to scale,” and he added, in reference to solar power, “It’s always sunny in space!”

Musk said in the announcement that he estimates “that within 2 to 3 years, the lowest cost way to generate AI compute will be in space.” The Associated Press said the prediction is not shared by all major companies building data centers for AI, including Microsoft, which has been weighing practical and political constraints as communities push back against new facilities.

Microsoft President Brad Smith told The Associated Press last month that he would be “surprised if people move from land to low-Earth orbit,” when asked about alternatives for building data centers in the U.S. amid rising community opposition. The AP reported that Microsoft’s stance reflects the broader uncertainty many companies have about how quickly AI infrastructure could shift away from Earth-based power and logistics.

Competition in artificial intelligence is also part of the backdrop for Musk’s consolidation. The Associated Press reported that Musk has been trying to keep pace with rivals such as OpenAI, and that his dislike of OpenAI—which he helped found more than a decade ago—was part of what led him to start xAI in 2023 and build the Grok AI product as a competitor.

The Associated Press also connected Musk’s broader corporate strategy to recent moves in his other companies. It reported that Tesla has announced a $2 billion investment in xAI, and noted that Musk has used control over multiple companies to merge operations before, including Tesla’s acquisition of SolarCity a decade ago and xAI’s purchase of X, formerly known as Twitter.

Outside investors and deal structures are another element in the story. The AP reported that terms of SpaceX’s purchase of xAI were not disclosed and that a fund in which President Donald Trump’s son, Don Jr., is a partner—1789 Capital—has made more than $1 billion in investments in various Musk companies in the past year, including SpaceX, xAI and X, according to Pitchbook.

The AP also reported that Musk has continuing ambitions for space-based technology beyond AI compute, including a long-stated goal of colonizing other planets as a contingency for disasters on Earth. At the World Economic Forum in Davos last week, the Associated Press said Musk mused about humanity being a “tiny candle in a vast darkness, a tiny candle of consciousness that could easily go out.”