Elon Musk’s SpaceX acquired xAI, opening the door to richer financing of the merged entity’s AI research, a tighter focus on space applications of AI, and — if Musk’s dreams are realized — solar-powered data centers in space.
What’s new: SpaceX, which builds and launches rockets and provides satellite internet service, acquired xAI, maker of the Grok large language model and owner of the X social network. Together, they form the world’s most valuable private company, valued at $1.25 trillion. The terms of the all-stock deal were not disclosed. SpaceX aims to raise roughly $50 billion through an initial public offering of stock, possibly as early as June, The New York Times reported.
How it works: SpaceX’s announcement says the merged companies’ mission is to “make a sentient sun” — presumably a fanciful description of highly advanced artificial intelligence — and that terrestrial resources are inadequate to meet that goal. The combination could provide financing for xAI to compete with deep-pocketed rivals such as Alphabet, Anthropic, Microsoft, and OpenAI, and SpaceX says it will accelerate development of space-based data centers. Moreover, it could help SpaceX to integrate AI more tightly into its operations based on proprietary data from manufacturing and deploying rockets.
- xAI makes Grok as well as Aurora (text-to-image generator), Grok Imagine (text, images, and video to video), Grok Code (text-to-code generator), and Grok Voice (a voice agent). In a separate deal in March, the company acquired X, formerly Twitter, giving its models a ready-made base of users, which are available on the social network. SpaceX was one of its first corporate customers, for which it built a space-focused version of Grok known as Spok.
- SpaceX supplies rocketry services to the U.S. government and private satellite companies. It also operates Starlink, the largest provider of satellite internet service by customers (9 million) and satellites in orbit (nearly 11,000).
- SpaceX has worked on space-based data centers in the past. The company’s statement says they are a top priority and will be cost-effective within two to three years. They would use the ample solar energy available in space, reducing demand for energy and other resources on Earth.
Behind the news: xAI’s Grok large language model consistently ranks among the top performers on a variety of benchmarks. However, it has gained a reputation for its odd and sometimes disturbing output, which can spread quickly and widely on the X social network. For instance, in January, responding to X users’ requests to depict the women wearing skimpy clothes, Grok generated tens of thousands of sexualized images of girls and women without their consent, leading to reports of investigations and legal actions in a number of countries. Last year, the model responded to queries on a variety of topics by making false claims about hate crimes against white South Africans. The company blamed a rogue employee for the incident.
Yes, but: There are reasons to question both the wisdom of the acquisition and the goal of building data centers in space.
- Neither SpaceX nor xAI is a public company, which makes the financial underpinnings of the deal difficult to evaluate, The Wall Street Journal reported. For an aerospace company, SpaceX reportedly earns a very high profit margin of around 50 percent. However, acquiring xAI exposes SpaceX, which is well established in the aerospace industry, to the risk that the AI boom is an economic bubble akin to the dot-com bubble that burst in 2000.
- The environment outside Earth’s atmosphere is cold, which supports the idea that it can cool the heat generated by data-center servers. But the vacuum of space traps heat within objects, and dissipating it would require novel technology, The Associated Press reported. Moreover, satellites in orbit would be vulnerable to damage from collisions with space-borne debris and would be difficult to repair.
Why it matters: The simplest, most direct impact of SpaceX’s acquisition of xAI is to boost xAI’s access capital based on its new parent’s revenue and, soon, its value as a public company. This could put it on firmer footing to compete with AI leaders. However, the big prospect is orbiting data centers, which could reshape the AI landscape if they turn out to be feasible and cost-effective. AI giants have committed immense sums to building data centers that will be necessary to serve their projections of demand for AI. This activity has raised questions about where the energy, water, and land required will come from and worries that the market will not support the huge expenditures. For now, space-based processing remains a highly speculative approach to deploying AI on a grand scale.
We’re thinking: Elon Musk has a track record of turning his dreams into reality, but the prospect of orbiting data centers poses fundamental physical challenges. Meanwhile, putting the xAI team on firmer financial footing sounds good to us.