The News
Elon Musk’s SpaceX bought Elon Musk’s xAI, and filed plans to launch a million “orbital data center” satellites.
The $1.25 trillion merger represents two major bets, Ars Technica’s space editor wrote: That AI is not going anywhere, and space-based computing power will be cost-competitive — Musk himself told employees it would be “within two or three years.”
Yet according to The Information’s co-executive editor, the decision also shows that Musk faces “the same financial realities the leaders of other AI startups face: It’s very difficult to compete in AI development with deep-pocketed tech giants.”
Indeed, cloud-computing giant Oracle borrowed $25 billion in order to provide compute for OpenAI, with analysts warning that its huge debt was weighing on its stock.
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Liz’s view
The record-setting merger also shows that for all its empire-building — cars, robots, satellites, brain implants, alt-right-infused AI-generated porn — Elon Inc. has always been about one thing: Mars.
Musk has tapped Tesla and his own fortune before to pay for SpaceX, which is his first, primary, and lifelong obsession. He’s willing to bend the norms of corporate finance — and, by listing SpaceX later this year, double the burden of running a public company, something he’s long despised — to build a “Kardashev II-level civilization” and not get lapped by Jeff Bezos or anyone else in the race.
The merger’s headline figures are, essentially, made up: SpaceX and xAI, and their stock, are privately valued by a shareholder base controlled by Musk and populated by his friends. A SpaceX IPO, if blessed by the planetary gods, will unfuzz that math. It will also clarify the rationale behind plugging the social network formerly known as Twitter (which xAI bought last year in another hand-wavy deal valued at $33 billion) into a satellite launcher.
Room for Disagreement
Musk’s move can be seen as a way to salvage xAI, which burns $1 billion a month, the FT’s tech team reports.
“It’s a win for both, but net a bigger win for xAI shareholders — on its own, xAI is not that good . . . Google and OpenAI are dominating with consumers, Anthropic with enterprise [customers],” an xAI investor told the outlet. “So the reality is there wasn’t a choice, he couldn’t leave xAI alone.”
Notable
- “A merger between SpaceX and Tesla would instantly create the Berkshire Hathaway of the modern century,” venture capitalist and former Facebook executive Chamath Palihapitiya wrote on X. “The capital raising and operational efficiencies if both were together are obvious.”
- The 2026 reason to sending rockets into space has to do with infrastructure — first, internet satellites, and now, AI data centers in orbit, Bloomberg’s Matt Levine writes. The SpaceX-xAI merger could be a first step in that direction, and the consolidation a way to move toward steady cash flows and conservative capital to source the immense resources required to fund the AI boom.