SpaceX to merge with xAI, seek an IPO valuation of $1.25 trillion

Elon Musk’s giant space company is merging with his AI company.

“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 post on SpaceX’s blog.

After the tie-up, the combined company is aiming to go public at a valuation of about $1.25 trillion, per a Bloomberg report.

Tesla, which Bloomberg had previously reported to have been in consideration to be merged among the companies in some way, wasn’t mentioned in the report of the deal. Shares were roughly flat after-hours.

The move would tie together two of Musk’s signature companies — two of the biggest privately held firms in the world. It would also bundle together rockets, satellites, the social media site X, and artificial intelligence all under one company.

Musk’s companies are already extremely interconnected, including Tesla’s recent $2 billion investment in xAI.

On one hand, an IPO at a valuation of $1.25 trillion would immediately place the combined SpaceX/xAI into the top 10 most valuable publicly traded companies on US exchanges. It would be one of the biggest global IPOs ever by valuation. (The largest IPO on record is Saudi Aramco, which went public in Saudi Arabia valued at about $1.9 trillion in 2019.)

On the other hand, would you rather own SpaceX and xAI or Berkshire Hathaway and $200 million?

The Takeaway

The “just put the AI data centers in space” theory has gotten a great deal of traction lately, despite some significant engineering challenges ahead. Yes, solar energy is available in space, and space is cold. However, thermodynamically speaking, “cold” is more accurately stated as an absence of “hot,” and the absence of “hot” is more related to the absence of, well, anything in space.

Whether it’s actually viable to install, maintain, power, and cool a data center in orbit — and whether it’s competitive to do that compared to installing, maintaining, powering, and cooling a data center in, say, Missouri — is both an unsolved scientific, engineering, and financial question that SpaceX will soon attempt to answer.