Elon Musk’s rocket company SpaceX acquired his artificial intelligence startup xAI in a deal that values the combined business at $1.25 trillion. SpaceX is worth $1 trillion and xAI is valued at $250 billion. According to The Guardian, a stock market listing is expected in June to coincide with Musk’s birthday and a planetary alignment.
Moving Data Centers Into Orbit
Musk says the deal will move datacenters into space. AI companies depend on earth-based datacenters that use massive amounts of energy. The solution involves putting up to a million satellites into orbit to form vast solar-powered datacenters.
Prof Julie McCann and Prof Matthew Santer from Imperial College London say solar-powered datacenters could work for AI companies. But current satellites have limits on compute power. The plan needs a planet-wide distributed computer made of many satellites working together.
Technical Challenges Remain
The quality of connection between orbiting devices may affect execution. The satellites must operate together to match ground datacenters as they send data to Earth. Other problems include solar radiation and maintenance. Datacenters on earth get constant maintenance because component failure is normal. Shipping parts to space is complex and expensive.
Musk says these datacenters will add 100 gigawatts of AI capacity each year. Current global datacenter capacity is about 59GW. He told employees the merger would create the most ambitious vertically integrated innovation engine on and off Earth.
Financial and Shareholder Questions
The xAI company burned through $13 billion last year. Unlike Meta, Amazon, Microsoft and Google, it does not have a legacy business to fund its work. Combining with SpaceX gives xAI better access to cash and investors, says Ross Gerber, an investor in Tesla and SpaceX.
SpaceX made about $8 billion in profit on $15 billion to $16 billion of revenue last year. Adding xAI changes the financial profile overnight. Michael Sobel from Scenic Management says the merger requires investors to do more homework on how xAI’s cash burn impacts SpaceX’s valuation.
Musk owns about 44% of the enlarged SpaceX business and 17% of Tesla. Some analysts see a growing chance of combining SpaceX and Tesla next.
