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

Elon Musk said the main reason merge SpaceX is trying to make “orbital data centers” more efficient with its artificial intelligence startup xAI. 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 believed that “within 2-3 years, the cheapest way to do AI computing will be in space.” But xAI will need huge cash to fund its massive infrastructure build as the three-year-old company tries to catch up. GoogleOpenAI and Anthropic in the emerging generative AI market.

SpaceX, which is aiming for a record IPO this year, may be the most obvious way for Musk to land that capital. The company aims to raise up to 50 billion dollars assessment According to Reuters, up to 1.5 trillion dollars.

A major key to SpaceX’s growth is its Starlink satellite Internet service, which today has about 9,000 satellites in orbit and about 9 million customers. It recently received approval from the Federal Communications Commission another 7,500 satellites into orbit.

Tim Farrar, president of satellite and telecommunications industry research firm TMF Associates, SpaceX said it could not spend that kind of money on its existing business because there are too many rocket launches each year to send Starlink satellites into space.

Folding XAI into SpaceX, Farrar said, would allow Musk to capitalize on investors’ insatiable appetite for AI holdings, while ensuring the AI ​​company’s financial health regardless of costs. According to a report by The Information magazine late Monday, xAI told investors it burned through about $9.5 billion in the first nine months of 2025.

“People are throwing tens of billions of dollars at AI companies now, and in six months or 12 months they might change their minds,” Farrar said. It’s “possible to get money” now, but maybe not forever.

At the beginning of January, xAI was closed $20 billion funding round estimated at about 230 billion dollars. OpenAI was valued at $500 billion in October and is looking to raise that to around $750 billion in the next round. Anthropic signed a term sheet this month for a financing that values ​​the company at $350 billion.

In addition to friendly capital markets, Musk has the advantage of a very favorable regulatory landscape as the Trump administration rolls back environmental, antitrust and other regulations.

Nowhere in Monday’s blog post did it mention the need for regulatory approval, and Musk suggested the transaction was done in the first sentence of the statement. Nevada public records obtained by CNBC show the deal was completed on February 2, according to Space Exploration Technologies Corp. listed as “managing member”. X. AI Holdings.

Of particular importance to Musk is the recent installation of his business partner and former investor and customer of SpaceX Jared Isaacman As the head of NASA. Isaacman supported accelerating initiatives that would expand the agency’s contracts with SpaceX. And FCC Chairman Brendan Carr there is SpaceX has been an active supporter of Starlink.

The landscape of technology mergers has also changed dramatically President Donald Trump Republicans control the White House and both houses of Congress. The Federal Trade Commission is now headed by Andrew Ferguson, who was appointed by Trump to replace Lina Khan, who is known for blocking big tech deals. Joe Biden’s presidency.

Speaking of AI, Musk’s longtime friend David Sachs is the White House crypto and AI czar and has pushed the federal government to limit the amount of scrutiny AI labs face as they pursue aggressive growth strategies. In December, President Trump signed the agreement executive order Issuing a single regulatory framework for artificial intelligence would undermine the ability of individual states, particularly blue states like California and New York, to implement their own regulations.

“To win, America’s AI companies must be free to innovate without burdensome regulation,” he said order said. “But excessive government regulation impedes that imperative.”

Although Musk still has three years left in Trump’s second administration, he may have a small window of unified Republican control with the midterm elections nine months away and the president’s approval numbers declining.

Musk moves fast. It is likely to be backed by a loyal group of investors with a long history of supporting pooling of resources and mergers of companies.

In 2016, Tesla bought SolarCity for $2.6 billion, saving it from a liquidity crisis. Prior to the merger, Musk was a major investor in the solar business and served as chairman of the company he co-founded with his cousins.

In 2022, when buying Twitter (which later became X), Musk was sold for billions of dollars. Tesla shares deal financing. He also recruited dozens of employees and even some executives from SpaceX, Tesla and tunneling company The Boring Co. to help us take over and make major changes to the platform.

At Tesla, Musk has made a number of related-party transactions with SpaceX and, more recently, xAI.. For example, Tesla sold auto parts and solar equipment to SpaceX, and the automaker relied on SpaceX to create a special alloy for its Cybertruck.

in 2025, Tesla reportedly sold its giant backup batteries called Megapacks to xAI for $430 million. to give came out last week, representing about 3.4% of Tesla’s energy business revenue for the year. The batteries will help power the xAI data infrastructure being built near Memphis, Tennessee.

Shortly before that filing, Tesla said it had invested $2 billion in xAI as part of the company’s latest funding round. SpaceX in July 2025 It was reported that he invested $2 billion to xAI.

Farrar said Musk’s biggest fans and institutional investors are ready to back the transaction line. “Muskonomics” in part because they understand the symbolic importance of keeping his entire portfolio strong.

“It’s all based on faith in him,” Farrar said. “If any part of his empire falls by the wayside or goes bankrupt, then he will destroy everything.”

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