The merger between Elon Musk’s SpaceX and xAI companies is a done deal, the former announced on Monday. SpaceX will acquire 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.
“This marks not just the next chapter, but the next book in SpaceX and xAI’s mission: scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars,” Musk wrote in a statement. There had been reported talks for days on whether or not the deal would be finalized, but both parties and Musk announced the done deal. The merger puts the new unified company to a valuation of $1.25 trillion. Employees of both companies were notified of the finalization of the merger on Monday.
Additionally, Musk said in his statement that he sees the merger as a way to generate AI compute in an effective and cheaper way. “My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute 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 added that with AI continuing to be of huge importance, its development needs to happen on a larger sale: like space. Current advances in AI are dependent on large terrestrial data centers, which require immense amounts of power and cooling. 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. In the long term, space-based AI is obviously the only way to scale.”
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Furthermore, the merger comes shortly before SpaceX’s IPO, now adding a new layer for early investors to consider. The new Mega IPO doesn’t have an expected date yet, but will likely open to being worth hundreds of dollars a share. The transaction marks the largest tie-up in Musk’s vast business portfolio and brings together two companies that have been soaring in value on the private markets. SpaceX opened a secondary share sale last year at a valuation of $800 billion, while xAI was valued at about $230 billion in a $20 billion round that closed earlier this year.
Before the merger was announced, SpaceX said it was planning an initial public offering that could raise as much as $50 billion and value the company at about $1.5 trillion. It’s unclear how the merger will affect these numbers, but the combined valuation of both companies is now just $250B short of the previously suggested value.