Elon Musk’s SpaceX acquires his AI start-up with vision to build data centres in space

AUSTIN, Texas - Mr Elon Musk’s SpaceX has acquired xAI in a deal that encompasses the billionaire’s increasingly costly ambitions to dominate artificial intelligence (AI) and space exploration.

The tie-up may crystallise Mr Musk’s vision to put data centres in space to do complex computing for AI. SpaceX is requesting permission to launch as many as a million satellites into earth’s orbit for the plan.

The deal, which gives the combined company a valuation of US$1.25 trillion (S$1.6 trillion), was announced to SpaceX employees in a memo on Feb 2.

SpaceX acquired xAI to “form the most ambitious, vertically integrated innovation engine on (and off) earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform”, according to the statement by Mr Musk.

The transaction values SpaceX at US$1 trillion, and xAI at US$250 billion, according to a person familiar with the matter.

SpaceX is still expecting to hold an initial public offering later in 2026, one of the people said. The combined company of SpaceX and xAI is expected to price shares at about US$527 each, another person familiar with the matter said.

The purchase of xAI sets a new record for the world’s largest mergers and acquisitions deal, a distinction held for more than 25 years when Vodafone bought Germany’s Mannesmann in a hostile takeover valued at US$203 billion in 2000, according to data compiled by LSEG.

SpaceX was already the world’s most valuable privately held company, last valued at US$800 billion in a recent insider share sale. xAI was last valued at US$230 billion in November 2025.

In explaining the rationale for the deal, Mr Musk said the least expensive way to do AI computations within two to three years will be in space.

“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,” he wrote.

The offering further entangles Mr Musk’s various business ventures. The billionaire acquired social media platform Twitter in late 2022, renamed it X, then merged the site with his AI start-up xAI in a US$33 billion deal. 

xAI, which also operates chatbot Grok, is an expensive operation, burning around US$1 billion a month in service of its stated ambition to gain “a deeper understanding of our universe”. A merger with SpaceX pools capital, talent and access to computing power – and blurs corporate boundaries.

But the merger could draw scrutiny from regulators and investors over governance, valuation and conflicts of interest given Mr Musk’s overlapping leadership roles across multiple firms, as well as the potential movement of engineers, proprietary technology and contracts between entities.

Unlike some of Mr Musk’s other ventures, SpaceX stands out as arguably his most successful and consistent business. The company, the only American one that can routinely send astronauts to and from the International Space Station, is a key rocket launch provider for both NASA and the US Department of Defense, which the White House has moved to rename the Department of War. 

The increasing revenue it is generating from the Starlink network of more than 9,000 satellites is even more significant, now outpacing launch sales and presenting a potential source of funding for xAI’s capital-intensive business. BLOOMBERG, REUTERS