Elon Musk’s companies SpaceX and xAI may have a solution to AI’s demand for power, though it involves creating the largest private company in the world. Musk’s company SpaceX recently announced a merger with another of his companies, purportedly to help curb the demand of data centers here on Earth. While Musk envisions that it will take a few years to reduce the cost of AI data demands, this comes at a time when 2026 is shaping up to be an incredibly expensive year for consumer electronics.
Nonetheless, the merger means that SpaceX has a valuation of around $1 trillion, putting it in the lead as the largest private company in the world. However, Musk did mention in December 2025 that the company is planning an initial public offering (IPO) in an effort to raise $30 billion dollars. The IPO may value the company up to $1.5 trillion, which could potentially double Musk’s $461 billion net worth should the company go public.
The news follows hot off the heels of Musk’s electric vehicle company Tesla recently announcing it was killing two of its popular vehicle models to focus on AI robots. The EV company also invested $2 billion into xAI in January. The move was made despite some shareholders having reservations about funneling the money into another Musk company. The news also follows a recent report that SpaceX has plans for Starlink to make low Earth orbit safer for travelers.
SpaceX merges with xAI for outer space data centers
Announced Feb 2, 2026 in a SpaceX press release, the company declared that it’s acquiring xAI, a move putting them far ahead of the second most valuable private company, which is OpenAI with a $500 billion valuation. As noted by PitchBook through CNN, as of December 2025, SpaceX held a value of $800 billion after a secondary share sale that month. Meanwhile, xAI had a funding round in January, putting them at a value of $230 billion.
According to SpaceX’s press release, the merger is a means of expanding the capabilities of xAI, claiming that Earth is currently unable to support the demands of AI. The press release states, “Global electricity demand for AI simply cannot be met with terrestrial solutions, even in the near term, without imposing hardship on the communities and the environment.” According to the release, Musk estimates that generating AI computations in space will be the lowest-cost method in two to three years.
At the end of January, SpaceX asked for permission from the Federal Communications Commission to launch over one million satellites into the sky in an effort to “accommodate the explosive growth of data demands driven by AI.” According to Goldman Sachs, demand for global power from AI data centers will increase 165% by the end of this decade. With data centers already increasing the cost of certain goods for consumers, the future of AI is going to be expensive.
