Musk’s SpaceX combines with xAI at $1.25 trillion valuation

The deal brings together two of the largest closely held companies in the world.

• SpaceX acquires xAI, forming a $1.25 trillion AI and space innovation company
• Combined firm aims to integrate AI, rockets, space internet, and real-time info
• SpaceX still plans an IPO later this year, potentially raising up to $50 billion

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Elon Musk’s SpaceX has acquired xAI, in a deal that encompasses the billionaire’s increasingly costly ambitions to dominate artificial intelligence and space exploration.

The transaction was announced in a statement on SpaceX’s website signed by Musk and confirming an earlier Bloomberg News report.

The deal gives SpaceX a valuation of $1 trillion, and xAI a value of $250 billion, people familiar with the matter said. The combined company’s valuation of $1.25 trillion was announced to employees in a memo on Monday, some of the people said earlier.

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.

The combined firm’s shares are expected to be worth $526.59 each, according to some of the people, who asked not to be identified as the information isn’t public. The deal is all stock, one of the people said.

The deal brings together two of the largest closely held companies in the world. XAI raised funds at a $230 billion valuation in January, while SpaceX was set to go ahead with a share sale in December at a valuation of about $800 billion, Bloomberg reported.

Terms of the offering including price and valuation weren’t disclosed in the statement on SpaceX’s website.

The company is still expecting to hold an initial public offering later this year, one of the people said. SpaceX had been planning an IPO that could raise as much as $50 billion, Bloomberg News reported earlier.

In explaining the rationale for the deal, Musk said in the statement that 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.

Read More: Will Putting AI Data Centers in Space Actually Work?

SpaceX is requesting permission to launch as many as a million satellites into the Earth’s orbit for the plan, according to a filing Friday.

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

XAI, which also operates chatbot Grok, is an expensive operation, burning around $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, access to computing power — and blurs corporate boundaries.

Unlike some of 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’s 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.