Musk’s xAI needs SpaceX for money. Data centers in space are a dream

Elon Musk said the main reason for merging SpaceX with artificial intelligence startup xAI was to build “orbital data centers” more effectively. This is for the distant future.

For now, xAI has a much more pressing need: cash.

on monday blog post Announcing the merger of his two companies, Musk predicted that “within 2 to 3 years, the lowest-cost way to produce AI computing will be in space.” But xAI needs a huge amount of money to finance the massive infrastructure build that the three-year-old company is trying to keep up with. GoogleOpenAI and Anthropic in the emerging generative AI market.

SpaceX, which is reportedly aiming to go public this year with a potentially record-breaking IPO, may represent Musk’s clearest path to obtain that capital. The company aims to reach 50 billion dollars at once valuation According to Reuters, this figure goes up to 1.5 trillion dollars.

A major key to SpaceX’s growth is its satellite internet service Starlink, which today has nearly 9,000 satellites in orbit and nearly 9 million customers. It recently received clearance from the Federal Communications Commission. Another 7,500 satellites were placed into orbit.

Tim Farrar, president of satellite and telecom industry research firm TMF Associates. He said SpaceX cannot devote that much money to its current business because the number of rocket launches needed to send Starlink satellites into space each year is limited.

Farrar said bringing xAI into SpaceX allowed Musk to tap into investors’ insatiable appetite for AI assets while also securing the AI ​​company’s financial position despite mounting losses. xAI told investors it burned about $9.5 billion through the first nine months of 2025, according to a report in The Information late Monday.

“People are spending tens of billions of dollars on AI companies right now, and they may change their minds about it in six months or 12 months,” Farrar said. “It is possible to get the money” right now, but it may not be forever.

In early January, xAI closed a $20 billion funding round at a valuation of approximately $230 billion. OpenAI was valued at $500 billion in October and reportedly plans to increase that to around $750 billion in the next round. Anthropic signed a term sheet this month for a fund that values ​​the company at $350 billion.

In addition to a friendly capital market, Musk also has the advantage of an extremely favorable regulatory environment due to the Trump administration’s rollback of environmental, antitrust and other regulations.

Monday’s blog post made no mention of needing any regulatory approval, and Musk suggested the transaction had been completed in the first sentence of the statement. Public records for the state of Nevada obtained by CNBC show that the deal was completed on February 2, with Space Exploration Technologies Corp. listed as a “managing member.” X.AI holdings.

Of particular importance to Musk is the facility recently built by his business partner and former SpaceX investor and customer. Jared Isaacman was appointed head of NASA. Isaacman supported accelerating initiatives that would expand the agency’s contracts with SpaceX. And at the FCC, Chairman Brendan Carr to have He was a vocal advocate of SpaceX’s Starlink.

With President Donald Trump in the White House and Republicans controlling both houses of Congress, the landscape for technology mergers has also changed dramatically. The Federal Trade Commission is now run by Trump appointee Andrew Ferguson, rather than Lina Khan, who was known for blocking big tech deals during Joe Biden’s presidency.

When it comes to AI, Musk’s longtime friend David Sacks is the White House’s cryptocurrency and AI czar and has pushed the federal government to limit the amount of oversight faced by AI labs pursuing aggressive growth strategies. In December, President Trump signed an executive order issuing a single regulatory framework for AI, undermining the power of individual states (i.e., blue states like California and New York) to enforce their own rules.

“To win, AI companies in the United States must have the freedom to innovate without cumbersome regulations.” order in question. “But excessive State regulation precludes this obligation.”

While Musk still has three years left in a second Trump administration, he may have only a small window for unified Republican control, with the midterm elections coming in nine months and the president’s favorability ratings falling.

Musk is moving fast. And it likely has the backing of a loyal group of investors with a long history of pooling resources and supporting mergers of companies.

Tesla bought SolarCity for $2.6 billion in 2016, saving it from the impending liquidity crunch. Before the merger, Musk was a major investor in the solar energy industry and was chairman of the company he founded with his cousins.

Musk sold his shares worth billions of dollars in a leveraged buyout of Twitter (which later became X) in 2022. It is using Tesla shares to finance the deal. He also tapped dozens of employees, even some executives, from SpaceX, Tesla and tunneling startup The Boring Co. to help him with the acquisition and make sweeping changes to the platform.

According to a report, Tesla sold $430 million worth of its giant backup batteries called Megapacks to xAI in 2025. filing Last week, Tesla’s energy business accounted for about 3.4% of its revenue this year. The batteries help power the data infrastructure xAI has built around Memphis, Tennessee.

Shortly before the application was filed, Tesla announced that it would invest $2 billion in xAI as part of the company’s latest funding round. SpaceX in July 2025 It was reported that the investment 2 billion dollars to XAI.

Farrar sees Musk’s biggest fans and institutional investors involved in a complex network of transactions, or “Muskonomi” partly because they understand the symbolic importance of keeping the entire portfolio strong.

“It all depends on the trust in him,” Farrar said. “If any part of his empire falls by the wayside or goes bankrupt, it undermines everything.”

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