SpaceX Acquires xAI in $1.25 Trillion Deal, Paving Way for Space-Based AI Data Centers

By Perplexity News Staff | February 4, 2026

In a groundbreaking move that fuses aerospace engineering with artificial intelligence, SpaceX has officially acquired Elon Musk’s AI startup xAI, creating what is now the world’s most valuable private company valued at approximately $1.25 trillion.

The acquisition, announced on Monday, marks a pivotal consolidation of Musk’s tech empire, bringing together SpaceX’s rocketry expertise and xAI’s cutting-edge AI development under one roof. Musk, CEO of both companies, described the merger in a memo as forming “the most ambitious, vertically-integrated engine of innovation both on Earth and beyond.”[2][3][4]

Vision for Orbital Data Centers

At the heart of the deal is Musk’s ambitious plan to build data centers in space, leveraging SpaceX’s Starship rockets and Starlink satellite constellation to overcome terrestrial limitations on energy and cooling for AI computing. “SpaceX has acquired xAI to create the most ambitious, vertically-integrated engine of innovation,” Musk stated, hinting at deploying orbital supercomputers that could process vast amounts of data without Earth’s resource constraints.[1][3][4]

xAI, which has been burning through approximately $1 billion per month to compete with rivals like OpenAI and Google, gains critical financial backing from SpaceX’s profitable Starlink operations. Starlink, which generates up to 80% of SpaceX’s revenue from satellite launches, will fund xAI’s massive compute needs, including its ‘Colossus’ cluster in Memphis powered by 100,000 Nvidia H100 GPUs.[1][4]

Impact on Upcoming IPO and Operations

The merger significantly alters SpaceX’s long-anticipated initial public offering (IPO), potentially offering investors exposure to both space exploration and AI innovation. Sources indicate SpaceX was preparing for an IPO as early as June 2026, which could value the company at $1.5 trillion standalone, though timelines remain uncertain post-merger.[2][3][5]

In a Q&A memo to xAI employees, the company assured staff that branding and operations will remain separate for now due to national security regulations governing defense and space technology sharing. xAI workers cannot access SpaceX databases without approval, though SpaceX staff may use xAI tools. The memo emphasized that xAI’s mission and share valuation remain unchanged, with more details on equity impacts forthcoming.[3]

Musk’s memo, shared online, envisions the combined entity integrating AI, rockets, space-based internet, direct-to-mobile communications, and real-time data from X (formerly Twitter), which xAI acquired last year. This creates a synergistic ecosystem: X provides training data for Grok, Starlink distributes it globally, and orbital compute processes it efficiently.[1][3][4]

Financials and Broader Implications

The deal values the combined entity at $1.2 to $1.25 trillion, boosting SpaceX from around $800 billion and xAI above $200 billion. This follows Tesla and SpaceX’s prior $2 billion investments in xAI and Musk’s pattern of merging ventures, including X with xAI.[2][4]

Key Valuation Metrics

Entity	Pre-Merger Valuation	Post-Merger Contribution
SpaceX	~$800 billion	Major uplift
xAI	~$200 billion+	Critical support
Combined	–	$1.25 trillion

Speculation abounds on stock impacts, with Tesla positioned as the primary investment play given Musk’s cross-company synergies. Nvidia, Rocket Lab, and Redwire are also highlighted as beneficiaries from AI hardware and space infrastructure demands.[1]

Challenges and Controversies

Despite the optimism, challenges persist. xAI faces intense competition and has faced scrutiny over its Grok chatbot, including loosened restrictions leading to AI-generated controversial imagery. SpaceX must prove Starship’s viability for lunar and Martian missions amid regulatory hurdles.[4]

Analysts like Walter Isaacson and Cathie Wood have praised the strategic necessity, citing xAI’s cash burn and the revenue ramp expected from space data centers in 2026-2027.[5][6]

“This merger is the ultimate expression of that philosophy. SpaceX + xAI: Space (infrastructure) meets AI (intelligence).”

Industry Observer on Musk’s Vision[1]

Future Outlook

As the dust settles, the SpaceX-xAI merger positions Musk’s empire to dominate the next frontier of AI and space tech. With an IPO on the horizon and orbital ambitions in sight, this deal could redefine how humanity computes, communicates, and explores the cosmos. SpaceX and xAI did not immediately respond to requests for further comment.

This article synthesizes reports from multiple sources including Axios, Business Insider, TechCrunch, and InvestorPlace.