Two of Elon Musk’s firms – SpaceX and xAI – have merged to become the world’s most valued company in the world at more than $1.25 trillion.
The billionaire’s rocket and satellite maker acquired the smaller AI startup last night, according to a blog post from Musk on the SpaceX website.
The acquisition brings together xAI – which faced a flood of criticism for its AI chatbot Grok producing sexualised images of women and children – with the most successful private space company in the world.
Musk said his reasons for the merger were simple: he wants to build a ‘sentient sun’, get humans to Mars and build cosmic data centres.
Earth-based data centres – which power AI – have such a big appetite for electricity that they’re projected to use as much power as Argentina.
They have pushed the electricity bills up for people who live near them and are forcing officials to carry out expensive upgrades to power grids.
On this, Musk said: ‘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. 😂’
‘By directly harnessing near-constant solar power with little operating or maintenance costs, these satellites will transform our ability to scale compute.
‘It’s always sunny in space!’
Why merge SpaceX with xAI now?
That’s the trillion-dollar question. Musk, the world’s richest man, already combined his social media platform X with xAI last year.
Musk’s other firms include the electric vehicle-maker Tesla and Neuralink, a brain interface company.
But yesterday’s deal may be to throw a financial lifeline to xAI, which was projected to lose some $13 billion last year.
The company has spent billions on data centres while earning only around $500 million from, in part, X’s monthly premium subscription.
This might be one of the reasons Musk decided to merge with himself, says Dat Ngo, of the trading guide, Vetted Prop Firms.
Ngo stresses that xAI has been in hot water in recent weeks, facing investigations by Ofcom and its Grok bot even being banned in countries.
After all, the UK’s data protection watchdog, the Information Commissioner’s Office, confirmed to Metro it is investigating X and xAI over Grok’s spree of nonconsensual nude images.
Ngo says: ‘There is one reality, which is that if xAI were solid on its own, it wouldn’t need this.
‘The recent problems with Grok suggest that this may be more damage control than a show of trust.’
Could this be a sign of the AI bubble bursting?
Last year, the Bank of England expressed fears that the ‘AI bubble’ could be on the verge of bursting.
Eager financial markets are putting all their eggs into AI, which could lead to a repeat of the dot-com bubble burst of the 1990s, plunging stocks.
Is xAI being swept into SpaceX a sign of what’s to come? Probably not, Alessia Paccagnini, an associate professor from UCD Michael Smurfit Graduate Business School, says.
‘It is more likely a sign that the market is rotating from pure model hype toward the hard constraints – energy, compute, distribution – and that valuations remain exposed to shifts in confidence.’
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