LOS ANGELES: SpaceX, the rocket and satellite maker led by Elon Musk, said Monday that it had acquired xAI, the artificial intelligence company controlled by Musk.
The deal creates the most valuable private company in the world, worth more than $1 trillion, with a portfolio that includes rockets, xAI’s Grok chatbot, and the social media platform X.
The combined company will most likely move forward with an initial public offering around June, said two people familiar with the plan who spoke on condition of anonymity because the details weren’t public, in which Musk hopes to raise about $50 billion.
By merging the companies, Musk provided a financial lifeline to xAI, which has spent heavily to catch up in the race to develop AI.
And it gives potential investors in SpaceX’s public offering an opportunity to buy in on the AI boom, while allowing Musk a chance to realize his vision of building data centers, the computing sites for powering the technology, in space.
“SpaceX has acquired 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,” Musk wrote in a memo addressed to some of his employees that was obtained by The New York Times.
The billionaire cited the need to build data centers in space as one of the main drivers for the transaction.
The unusual arrangement demonstrates how Musk, the world’s richest man, increasingly thinks of his various businesses as interconnected, even if there are no obvious overlaps.
Last year, he merged his social network X with xAI to consolidate the companies’ data, compute power and workforces. Now he’s taking an even bigger leap, merging the often troubled AI startup with SpaceX, arguably the most successful private space company in the world.
Musk, in the memo sent to workers at SpaceX and xAI, described the combined operation with far-reaching language evoking science fiction tales of humanity conquering space and traveling through the galaxy.
The merger also helps Musk, for whom Tesla shareholders recently approved a $1 trillion pay package, ensure that SpaceX grows in value on paper. But it would take a leap of faith to understand how a company that combined social media with an AI chatbot will help SpaceX achieve what Musk has long described as its ultimate goal: taking humans to Mars.
Musk made a similar manoeuvre in 2016 when he used stock of his electric car company, Tesla, to buy SolarCity, a clean energy company where he was the largest shareholder and his cousin Lyndon Rive was CEO.
SpaceX confirmed the acquisition on its website and shared Musk’s memo. Representatives for SpaceX and xAI did not immediately return requests for comment. Musk did not immediately respond to an emailed request for comment.
While Tesla, Musk’s automaker, is a publicly traded company that must disclose its finances and other information to shareholders, most of Musk’s companies are privately held and more opaque. Because of that, he doesn’t need to seek stakeholder approval for many of his business decisions.
His private companies include SpaceX; the Boring Co., a tunnelling startup; and Neuralink, a brain interface company. Musk often moves resources and employees among his companies, defying traditional business norms and operating his various companies as one big Musk enterprise.
“Ultimately, it’s likely there will be one Musk Inc. at the end,” said Peter Diamandis, the founder of the XPrize Foundation, a nonprofit focused on fostering technological development. Diamandis, who is also an investor in SpaceX and xAI, said he always believed Musk’s vision was to merge his companies together.
In December, SpaceX said it would allow employees to sell shares at a price that would value the company at around $800 billion before the potential public offering later this year. In January, xAI announced it had raised $20 billion, which valued the company at more than $230 billion. SpaceX invested $2 billion in xAI last year, the same amount Tesla said it agreed to invest last month.
Reuters first reported on merger talks between the two companies.
The combination of SpaceX, a major government contractor, and xAI carries some reputational risk. Musk’s chatbot, Grok, is the subject of several international investigations after it produced a spree of non-consensual nude images last month. And world leaders have fretted about the political influence Musk wields through Starlink, the satellite internet provider owned by SpaceX.