SpaceX Acquires xAI in $1.25trn Deal to Build AI Data Centres in Space
SpaceX Buys xAI for Space AI Data Centres

SpaceX, the pioneering aerospace manufacturer and space transportation company founded by Elon Musk, has announced its acquisition of artificial intelligence start-up xAI. This landmark deal brings together two of Musk's most ambitious ventures under one corporate umbrella, creating what the billionaire entrepreneur describes as "the most ambitious, vertically-integrated innovation engine on (and off) Earth."

The Vision for Space-Based AI

In a detailed statement released on Tuesday 3 February 2026, Musk outlined his vision for the combined entity. The merger aims to develop artificial intelligence data centres in space, leveraging the near-constant solar power available beyond Earth's atmosphere. Musk explained that this approach addresses the fundamental challenges of scaling AI computation on Earth, where power and space constraints increasingly limit technological advancement.

"In the long term, space-based AI is obviously the only way to scale," Musk wrote. "The only logical solution therefore is to transport these resource-intensive efforts to a location with vast power and space. I mean, space is called 'space' for a reason."

Creating a Trillion-Dollar Powerhouse

According to financial data from Bloomberg, the combined company would command a staggering valuation of $1.25 trillion (£910 billion). This monumental deal comes at a particularly strategic moment, preceding SpaceX's anticipated initial public offering expected to be announced later this year. The acquisition represents what Musk calls "not just the next chapter, but the next book in SpaceX and xAI's mission."

The merger creates a technological powerhouse with capabilities spanning artificial intelligence, rocket technology, space-based internet through Starlink, direct-to-mobile device communications, and what Musk describes as "the world's foremost real-time information and free speech platform" through X, formerly known as Twitter.

Corporate History and Context

This acquisition represents the latest chapter in Musk's complex corporate portfolio. The billionaire, who also leads electric vehicle manufacturer Tesla, purchased Twitter in 2022 for $44 billion (£38 billion). In a subsequent corporate restructuring, xAI acquired Twitter last year, rebranding it as X. This latest transaction sees SpaceX absorbing xAI, creating an even more integrated technological ecosystem under Musk's leadership.

Industry Competition and Parallel Developments

SpaceX is not alone in exploring the potential of space-based artificial intelligence infrastructure. Technology giant Google revealed its own ambitious research initiative last year called Project Suncatcher, which aims to equip solar-powered satellites with advanced AI computer chips. This parallel development suggests that multiple technology leaders see significant potential in moving computational infrastructure beyond Earth's atmosphere.

Meanwhile, xAI had been expanding its terrestrial operations, with Mississippi officials announcing last month that the company planned to invest $20 billion (£14.6 billion) to construct a major data centre near the state's border with Tennessee.

Regulatory Scrutiny and Ethical Considerations

The acquisition comes at a time when X has faced significant regulatory scrutiny in the United Kingdom. The platform recently came under investigation by Ofcom, the UK's independent online safety regulator, following complaints about users employing the platform's AI chatbot, Grok, to create sexualised images of real women and children.

Prime Minister Sir Keir Starmer called for the platform to comply with UK laws "immediately" regarding these concerns. In response, X announced that it had implemented technological measures to prevent Grok from editing images of real people in revealing clothing, with these restrictions applying to all users including paid subscribers.

The Future of Space-Based Computation

Musk's vision extends beyond immediate corporate consolidation to fundamentally reimagining where and how humanity conducts its most advanced computational work. By harnessing solar power in space, where operational and maintenance costs would be significantly reduced compared to terrestrial alternatives, Musk believes these satellite-based data centres could transform our computational capabilities.

"By directly harnessing near-constant solar power with little operating or maintenance costs, these satellites will transform our ability to scale compute," Musk explained. "It's always sunny in space." This poetic observation underscores the fundamental advantage Musk sees in moving computational infrastructure beyond Earth's atmosphere.