Musk Folds xAI Into SpaceX, Targets AI Data Centers in Space

Elon Musk is pushing the boundaries of artificial intelligence and space technology by merging SpaceX with his AI startup xAI, a move aimed at developing data centers in orbit to meet soaring global demand for computing power.

Reuters reported that the megamerger links Musk’s rocket and satellite empire with his fast-growing AI ambitions, creating a vertically integrated platform that could eventually host massive AI workloads in space. The deal values the combined entity at roughly $80 billion, according to people familiar with the matter.

At the heart of the strategy is a bold idea: placing solar-powered data centers in orbit, where constant sunlight and the vacuum of space could help reduce energy and cooling costs that plague Earth-based facilities. Musk has argued that space-based computing may be the only way to scale AI sustainably over the long term.

According to Dawn, SpaceX has already approached U.S. regulators about launching large numbers of satellites designed to function as orbital data hubs. The proposal builds on decades-old aerospace research but gains new urgency as AI companies scramble for power, land and infrastructure.

Supporters say the merger gives Musk a unique advantage. SpaceX already dominates global launch capacity and satellite deployment through its Starlink network, while xAI provides an internal customer for vast amounts of computing power. “It’s a classic Musk play — control the stack end to end,” one industry analyst told Reuters.

Still, the vision faces serious obstacles. Experts warn that radiation exposure, orbital debris, maintenance challenges and enormous upfront costs could delay commercial viability for years. Some analysts say space-based data centers remain more concept than concrete business plan.

The announcement comes as competition intensifies across the tech sector, with companies like Google and Amazon also exploring alternative computing infrastructure. But none match the scale of Musk’s integrated approach.

For now, the SpaceX-xAI merger signals Musk’s willingness to bet big — not just on AI, but on taking the backbone of the digital economy beyond Earth itself.

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