Tesla (TSLA), SpaceX, and xAI CEO Elon Musk seriously had a clear path in his mind when he announced the acquisition of X by xAI last year. “This is just the beginning,” wasn’t an overstatement by any means.
In an unprecedented move, Musk’s space exploration and astronautics company SpaceX acquired his AI and data center company xAI. While, to a common person, this would seem like a bizarre merger, it’s one of the most exciting ones for technological advancement.
According to Fortune, the acquisition of xAI puts SpaceX at an astonishing estimated valuation of $1.2 trillion. Tesla has a current market capitalization of $1.27 trillion, which makes Musk the founder and CEO of two trillion-dollar companies.
This is an interesting business loop. Since xAI owns the social media platform X, and now SpaceX owns xAI, SpaceX also owns X. A space company owning a social media platform is the first in the technology industry.
– Advertisement –A conceptual render of a Starship deploying a solar powered satellite to power data centers in space. Credit: SpaceX.
On the surface, this fusion of an AI company and a space launch corporation seems illogical, but Musk is known for his weird ideas. The core purpose of SpaceX’s acquisition of xAI is to create AI data centers in space.
After a long time, Musk published a blog post, this time on the SpaceX website. He explained the purpose of this historical merger of his companies in the very first paragraph, the why of this strategic move. He wrote:
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. This marks not just the next chapter, but the next book in SpaceX and xAI’s mission: scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars!
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Starship and AI Data Centers in Space
Elon Musk’s vision to power the future of power hungry AI data centers is harnessing as much of Sun’s energy as possible. However, this concept has yet to be proven.
The massive amount of payload needed to be delivered to the orbit for solar-powered space data centers is only possible with a huge spacecraft. SpaceX’s Starship according to Musk is the perfect fit for this mission. He wrote in his blog post:
In the history of spaceflight, there has never been a vehicle capable of launching the megatons of mass that space-based data centers or permanent bases on the Moon and cities on Mars require. Even in 2025, the most prolific year in history in terms of the number of orbital launches, only about 3000 tons of payload was launched into orbit, primarily consisting of Starlink satellites carried by our Falcon rocket.
SpaceX successfully deployed V3 Starship dummy satellites into space in Starship’s 11th launch test last year. These V3 Starlink satellites are significantly larger compared to the V1 Starlinks deployed via the Falcon rocket.
This was a monumental success that’s going to play a vital role in deploying solar-powered data centers in space. The huge size of the Starship would serve the purpose of taking massive loads to space in the future.
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In space, there is an almost non-stop supply of sunlight. This phenomenon makes the idea of space data centers much more appealing. In addition, there won’t be any additional space needed on the planet to set up data centers.
Electricity generation-related emissions and the release of heat energy to cool down massive data centers are also going to be minimal. Elon Musk plans to massively scale AI data centers to advance technology.
SpaceX is currently striving to achieve rapid reusability of Starship rockets and spacecraft (lower and upper stages) on par with its Falcon 9 rockets. Rapid reusability will reduce the cost of data center deployment in space and increase operational efficiency.
Musk further explained:
My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space. This cost-efficiency alone will enable innovative companies to forge ahead in training their AI models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and invention of technologies to benefit humanity.
– Advertisement –Flight 11 Starship 38 being moved from the launch site to Megabay 2 at Starbase, Texas. Credit: Elon Musk / SpaceX / X.
Tesla (TSLA) invests $2 Billion in xAI, SpaceX IPO
In its Q4 and full year 2025 financial update, Tesla (TSLA) disclosed that it has invested $2 billion in Musk’s xAI. The timing of this move is fascinating. Indirectly, Tesla made an huge investment in SpaceX.
Later this year, SpaceX is expected to go for an Initial Public Offering (IPO). In layman’s terms, SpaceX is going to be listed on a stock exchange. Institutional and retail investors will be able to buy its shares. SpaceX is currently a privately-held corporation.
Analysts think that SpaceX’s IPO is going to one of the most historic ones, probably its going to be a bigger deal ever seen before. At the time of the IPO, Tesla is going to already own a good number of shares and this investment might prove to be one of the best ones for the tech & AI-based automaker.
Tesla’s official announcement details the purpose and benefits of the xAI investment, the document states:
On January 16, 2026, Tesla entered into an agreement to invest approximately $2 billion to acquire shares of Series E Preferred Stock of xAI as part of their recent publicly-disclosed financing round. Tesla’s investment was made on market terms consistent with those previously agreed to by other investors in the financing round. As set forth in Master Plan Part IV, Tesla is building products and services that bring AI into the physical world. Meanwhile, xAI is developing leading digital AI products and services, such as its large language model (Grok).
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In that context, and as part of Tesla’s broader strategy under Master Plan Part IV, Tesla and xAI also entered into a framework agreement in connection with the investment. Among other things, the framework agreement builds upon the existing relationship between Tesla and xAI by providing a framework for evaluating potential AI collaborations between the companies. Together, the investment and the related framework agreement are intended to enhance Tesla’s ability to develop and deploy AI products and services into the physical world at scale. This investment is subject to customary regulatory conditions with the expectation to close in Q1’2026.
Author of more than 1500 articles on Tesla, SpaceX, and EVs. His work has been liked and tweeted by Elon Musk and other prominent influencers. You can reach him on Twitter @IqtidarAlii
 makes a big investment in Elon Musk's xAI just before SpaceX acquires xAI to build AI data centers in space, more.){kind=link}