What’s Really Driving Musk’s SpaceX-xAI Merger

Talk about pie in the sky. On Monday, Elon Musk announced that his SpaceX had acquired his cash-eating xAI, at a price we reported to be $250 billion. SpaceX was already planning to go public, but now xAI will be able to get some of the cash the newly enlarged company will raise. Of course, that’s not how Musk explained the combination. Instead, he framed the merger as a way of getting around the power limitations faced by Earthbound AI data centers. “In the long term, space-based AI is obviously the only way to scale,” he said. That may be true. But if it’s a long-term play, why is he combining xAI and SpaceX now—won’t xAI’s losses burden SpaceX? 

Indeed, Musk’s statement didn’t even attempt to explain how xAI would help SpaceX launch data centers into space. Let’s not forget, that ambition was already expected to be the focus of SpaceX’s IPO pitch. What does xAI bring to the party? The company is an AI model developer, responsible for the Grok models, and sells consumers subscriptions to Grok. It is also trying to sell Grok to businesses, so far not very successfully. It is burning lots of cash, as AI startups do. Oh, and it also owns X, formerly known as Twitter.