SpaceX has acquired xAI, Elon Musk’s artificial intelligence startup, formally bringing together two of his most capital-intensive ventures under a single corporate roof.

In a memo posted on SpaceX’s website, Musk said the merger is largely motivated by the limitations of terrestrial data centers, which require enormous amounts of electricity and cooling to support frontier AI models. He argued that global AI energy demand cannot be sustainably met on Earth alone without imposing significant strain on communities and the environment.

The deal values the combined company at approximately $1.25 trillion, according to Bloomberg News, which first reported the completed transaction. SpaceX has reportedly been preparing for a potential IPO as early as June, though Musk did not address whether the merger would affect that timeline.

The tie-up also consolidates financial risk. Bloomberg reports that xAI is currently burning close to $1 billion per month, while SpaceX generates as much as 80% of its revenue from launching Starlink satellites, according to Reuters. The acquisition follows xAI’s purchase of X (formerly Twitter) last year, which Musk said carried a combined valuation of $113 billion.

Why it matters: As AI models scale, compute is becoming an energy problem as much as a technical one. By pairing launch capability, satellite infrastructure, and AI development, Musk is signaling a future where space-based data centers may play a role in sustaining frontier AI growth — a controversial but increasingly discussed idea as Earth-bound infrastructure hits physical and political limits.