Elon Musk Merges SpaceX and xAI, Plans Solar-Powered AI Data Centres in Orbit

Elon Musk has taken another dramatic step toward blending artificial intelligence with space technology, announcing that SpaceX has officially acquired his AI startup, xAI. The move unites two of his most ambitious ventures under one roof and signals a future where powerful AI systems may no longer rely solely on Earth-based infrastructure.

The merger, Musk says, is about speeding up innovation and removing limits that terrestrial systems face. In a statement posted on SpaceX’s website titled “xAI joins SpaceX to Accelerate Humanity’s Future,” he described the combined entity as “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”.

Industry observers view the consolidation as Musk’s attempt to create a tightly connected ecosystem of technologies — one that could compete head-on with AI heavyweights such as Alphabet, Meta, Amazon-backed Anthropic, and OpenAI. It also deepens the links between Musk’s companies, including Tesla, Neuralink, and X, forming what analysts often call the “Muskonomy.”

Financially, the numbers are staggering. A famous publication reports that SpaceX is now valued at roughly $1 trillion, while xAI is estimated at $250 billion as part of the transaction. Shares in the merged entity are expected to be priced near $527 each. With plans for a possible public listing later this year, SpaceX’s valuation could climb past $1.5 trillion — potentially making it one of the most valuable tech offerings in history. For comparison, Vodafone’s acquisition of Mannesmann in 2000, long considered the largest M&A deal, was valued at $203 billion.

Beyond the business strategy, Musk’s long-term vision is even more ambitious: building AI data centres in orbit. He argues that the growing energy demands of artificial intelligence cannot realistically be sustained on Earth.

“Global electricity demand for AI simply cannot be met with terrestrial solutions, even in the near term, without imposing hardship on communities and the environment,” Musk said.

His solution is space-based infrastructure powered by solar energy. According to Musk, satellites could collect abundant sunlight in orbit and support vast computing clusters, dramatically expanding AI capacity without straining Earth’s grids. “In the long term, space-based AI is obviously the only way to scale,” he added.

The proposal involves deploying up to a million satellites functioning as orbital data centres. Musk believes such a network could move humanity closer to becoming a Type II civilisation on the Kardashev scale — a theoretical measure of technological advancement based on energy use.

“Launching a constellation of a million satellites that operate as orbital data centers is a first step towards becoming a Kardashev II-level civilisation, 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,” he said.

If realised, the plan could redefine both computing and space exploration, turning Earth’s orbit into the next frontier for artificial intelligence.