Mergers and X-quisitions

TL;DR: SpaceX is buying xAI for $250 billion to—according to Elon Musk—build AI data centers in space. But skeptics say it’s really a financial rescue for Musk’s AI company, which is burning cash, facing regulatory heat, and dragging X’s debt along for the ride—right as SpaceX gears up for a potentially historic IPO.

What happened: It’s 2030, and you’re at the HQ of a company that does rockets, AI, and social media. That’s not science fiction—it’s the future that Musk is building. Yesterday, Musk announced that SpaceX had acquired another of his firms, xAI, for a whopping $250 billion. The merged firm might be the most valuable private company in the world, with a post-move valuation around $1.25 trillion.

The merger bundles an extraordinary collection of Musk assets under one roof: rockets, Starlink satellites, the social network X (which xAI absorbed in March 2025), and Grok AI. Musk’s companies are already a deeply intertwined corporate hydra sharing investors, data, infrastructure, and executives—with Tesla even investing $2 billion into xAI last year.

Why this happened (Musk’s version): As the CEO of the newly merged SpaceX—perhaps soon to be called SpaceXAI?—Musk says the move is about building AI data centers in space, a moonshot project other companies like Blue Origin and Google are also pursuing. “In the long term, space-based AI is obviously the only way to scale,” he wrote on the SpaceX website. The company recently filed an FCC application to launch up to 1 million satellites for this orbital data center venture.

Space data centers could reduce resource strain and regulatory obstacles on Earth, and SpaceX, which already has over 9,000 satellites in low Earth orbit, is arguably the most well-positioned to do so. But it’s a lot more complicated than launching a bunch of AI chips taped together toward the sky—cooling and radiation shielding for the data centers are just two of many roadblocks. And the project will take an enormous amount of capital, which is a driving force behind SpaceX’s IPO. Before the merger, Musk was reportedly trying to raise up to $50 billion to take the company public later this year; earlier, there were even reports of a potential SpaceX and Tesla merger.

The big “but”: It’s not clear how xAI helps SpaceX accomplish these lofty ambitions. Even at Musk’s typically breakneck pace, turning space data centers into a reality is still a ways off. And if SpaceX is about to IPO, the inclusion of xAI threatens to drag down its valuation. X is also facing intense scrutiny from regulators around the world for the Grok AI deepfake controversy, with French police raiding X’s offices today related to potential possession of child sexual abuse material.

Why others think this happened: Analysts and tech journalists speculate that this is really about the money—money for xAI. The AI company burns through about $1 billion per month as it races to stay competitive with Google, OpenAI, Anthropic, Meta, and more; it recently raised $20 billion in funding. X, for its part, is still saddled with debt following the $44 billion acquisition of Twitter—and subsequent rebranding—in 2022, though revenue has reportedly improved after taking a dive following Musk’s takeover.

Meanwhile, SpaceX raked in about $8 billion in profit last year. Starlink subscribers also doubled. The xAI acquisition of X last spring was largely seen as a lifeline for the social media site—now, SpaceX is essentially giving xAI a blood transfusion.

Time is a flat circle: In a twist of fate, the social media site once known as Twitter could soon be a public company again if the SpaceX IPO happens. (Musk wrote to the Twitter board saying that it would need to be taken private to fulfill its “potential to be the platform for free speech.”) xAI acquired the social network last year, making this the third time Musk “buys” Twitter. At this point, we're not sure if he thinks owning X is an annual subscription. —WK