SpaceX Acquires Musk's XAI To Fuel Orbital Data Center Plans

SpaceX is merging with Elon Musk’s xAI ahead of a planned initial public offering and the billionaire’s effort to create orbiting data centers.

The IPO is expected to generate tens of billions of dollars, giving xAI a new source of funds. Musk also says the arrangement is meant to pave the way for space-based data centers, days after SpaceX filed a plan to operate up to one million satellites for the project.

“In the long term, space-based AI is obviously the only way to scale,” Musk says in a post announcing the xAI deal, which also cites the benefits of solar energy. “The only logical solution therefore is to transport these resource-intensive efforts to a location with vast power and space.”

The Information reports SpaceX is spending $250 billion to acquire xAI, citing a person familiar with the deal.

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SpaceX also describes the deal as creating “one of the most ambitious, vertically integrated innovation engines,” pointing to how the orbiting data centers can source all their rockets and computing technology from SpaceX and xAI. (xAI also owns X or what used to be Twitter.)

“It’s always sunny in space!” Musk adds. “Launching a constellation of a million satellites that operate as orbital data centers is a first step towards becoming a Kardashev II-level civilization, one that can harness the Sun’s full power, while supporting AI-driven applications for billions of people today and ensuring humanity’s multi-planetary future.”

To pull this off, Musk is betting that SpaceX’s more powerful next-generation rocket, Starship, will soon be capable of commercial missions. In addition, he envisions staging Starship launches “every hour carrying 200 tons per flight,” enabling the company to deploy the space-based data centers at a rapid clip.

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Still, orbiting data centers remain an unproven concept. A key challenge includes maintenance and creating a way to cool the GPUs when there’s no air in space to dissipate the heat. Others are already questioning the vast size of a one-million-satellite constellation when the existing Starlink network only has about 9,600 satellites. Even so, Musk predicts that his orbiting data centers will become mainstream in the near future at a time when ground-based data centers are facing backlash over the environmental and energy toll.

“My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space,” he wrote. “This cost-efficiency alone will enable innovative companies to forge ahead in training their AI models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and invention of technologies to benefit humanity.”