SpaceX buys xAI as Musk cites space data centers; experts skeptical

Elon Musk combined his companies SpaceX and xAI, creating what the companies say is the most valuable privately owned company in the world, the firms announced after the news broke on Monday. Musk said in a statement posted on SpaceX's website that the electricity demand for AI was too much and that, in the long term, AI data centers will need to operate in space.

Days before the acquisition, SpaceX submitted filings to the Federal Communications Commission seeking permission to launch satellites that would operate as AI data centers. The combined company was estimated in the report at about $1.25 trillion. Some experts are skeptical that space data centers are the real reason for the merger.

Tim Farris, president of satellite and telecom industry research firm TMF Associates, called Musk's space data center plan "a Rorschach test for potential SpaceX investors, just like Optimus does for Tesla investors," and wrote that "Both allow for near term demonstrations that look impressive but aren’t meaningfully revenue-generating, while allowing Musk to make long term projections of 'infinite' revenues that can be (nearly) infinitely postponed." The article says a merger also lets the companies pool resources to help their bottom line.

SpaceX is reportedly planning an IPO later this year that could raise up to $60 billion at a $1.5 trillion valuation, and Starlink is described as SpaceX's main revenue driver.

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