SpaceX acquires xAI for $250 billion to create $1.25 trillion space and AI powerhouse

Elon Musk’s SpaceX has acquired xAI, another Musk-led venture, in a $250 billion transaction.

The world’s richest man has integrated his two largest private enterprises to fulfill his objective of winning the artificial intelligence race through the development of orbital data centers.

SpaceX based xAI’s acquisition price on the company’s most recent $20 billion funding round, which valued the startup at $230 billion, according to two people familiar with the matter who spoke to the Financial Times (FT).

The sources added that after SpaceX’s private valuation was raised to $1 trillion—driven by surging revenue from the Starlink satellite broadband service—the value of the combined entity was set at $1.25 trillion following the deal.

The rocket company was most recently valued at $800 billion in a secondary share sale.

SpaceX Chief Financial Officer Bret Johnsen informed investors on Monday afternoon that shares in the merged company will be priced at $527.

xAI shares will be converted into SpaceX stock at a ratio of approximately seven-to-one.

Executives also confirmed that SpaceX remains on track for a targeted initial public offering (IPO) in June.

The FT previously reported that Musk wanted the company to go public that month to coincide with a rare planetary alignment of Jupiter, Venus, and Mercury.

The IPO is expected to raise as much as $50 billion. This would surpass the $29 billion raised by Saudi Aramco in 2019, making it the largest public offering of all time.

Bankers have suggested that Monday’s merger could complicate the accelerated timeline for the IPO.

The merger is part of Musk’s broader vision of “developing a sentient sun to understand the universe and extend the light of consciousness to the stars.”

xAI and competitors such as OpenAI and Meta have spent the last two years racing to develop the expensive data centers and chips required to train and operate AI models.

On Monday, Musk stated that “orbital data centers” will be critical to the future of the technology.

“Global electricity demand for AI cannot be met by terrestrial solutions, even in the short term, without bringing challenges to society and the environment,” Musk wrote. “In the long term, space-based AI is clearly the only way to scale.”

SpaceX’s planned IPO will allow the company to fund the launch of large satellites to realize Musk’s goals for orbital AI data centers.

“In an era dominated by AI maximalism, this is worth trillions of dollars,” said one individual who is an investor in both companies.

The news marks a broader consolidation of different wings of Musk’s empire under a single corporate umbrella. Last March, xAI merged with Musk’s social media platform, X.

That takeover valued the group at a total of $113 billion, with xAI valued at $80 billion and X at $33 billion. The merger allowed for closer integration between the companies.

xAI trained its models using data from X, and xAI’s Grok chatbot was integrated into the social media platform’s feeds.

Musk acquired X, formerly known as Twitter, for $44 billion in October 2022.

Musk also leads electric vehicle manufacturer Tesla, brain-implant company Neuralink, and the tunneling startup The Boring Company. Last week, Tesla announced a $2 billion investment in xAI.

The billionaire also removed two electric vehicle models from Tesla’s lineup, pivoting the company further toward the production of AI chips and humanoid robots. This move led investors to speculate that Musk’s long-term plan involves merging Tesla with his other ventures.

Musk has stated that in the future, SpaceX may begin landing large cargo shipments on the Moon.

“Factories on the Moon could produce satellites using lunar resources and launch them into space,” Musk wrote.