Why has Elon Musk merged his rocket company with his AI startup?
The acquisition of xAI by SpaceX is a typical Elon Musk deal: big numbers backed by big ambition.As well as extending “the light of consciousness to the stars”, as Musk described it, the transaction creates a business worth $1.25tn (£920bn) by combining Musk’s rocket company with his artificial intelligence startup.It values SpaceX at $1tn and xAI at $250bn, with a stock market flotation expected in June to time with Musk’s birthday and a planetary alignment.However, there are questions over the deal, such as whether it is good for SpaceX’s non-Musk shareholders and whether the technological premise behind it can succeed.
For Musk, a key part of the deal’s rationale is to move datacentres – the central nervous system of AI tools – into space.AI companies are too dependent on earth-bound datacentres that carry immense energy demands, Musk argued this week.The solution, he says, is to put as many as a million satellites into orbit to form vast, solar-powered datacentres.Prof Julie McCann and Prof Matthew Santer, the co-directors of the school of convergence science in space, security and telecoms at Imperial College London, say solar-powered datacentres could be a future option for AI companies.However, there are limits to how much compute power can be mustered by current satellites, they say, so it would need a “planet-wide distributed computer composed of many satellites” – as envisioned by Musk.
But even executing the concept might be affected by the quality of connection between the orbiting devices, which will need to operate in tandem in order to replicate terrestrial datacentres as they beam their outputs down to Earth,There are other problems to be ironed out, they add, including solar radiation and maintenance,“Datacentres on earth are constantly maintained – component failure is normal,Shipping components to space is complex and expensive, and you would have to be innovative regarding how components are fitted,”Musk talks of these datacentres adding 100 gigawatts of AI capacity annually – current global datacentre capacity is about 59GW – so his vision is ambitious.
The world’s richest person believes a merger of rocket hardware and AI software is a winning combination and, in a message to employees, said it would create the “most ambitious, vertically integrated innovation engine on (and off) Earth”.“This merger is aimed at creating a new path to generate a low cost of generating AI compute within the next two to three years by bringing together the top internet/space exploration company with top datacentre builders,” says Dan Ives, an analyst at the US financial services company Wedbush Securities.Musk’s artificial intelligence company, xAi, is competing with rivals who are spending, and raising, huge sums on the infrastructure – datacentres, computer chips – needed for their products.The company, which has developed the Grok AI tool and also owns the social media network X, reportedly burned through $13bn last year and, unlike Meta, Amazon, Microsoft and Google, does not have a cash-generating legacy business to fund its efforts.Combining with SpaceX will give xAI better access to cash and investors, according to Ross Gerber, an investor in Tesla and SpaceX.
“Musk is already running low on capital for xAI and it is competing with companies putting hundreds of billions of dollars into their AI investments.If you merge SpaceX and xAI you can support xAi because SpaceX is an extremely attractive prospect to a lot of investors,” he says.SpaceX’s technology is complex but it is a straightforward business.It generates revenues from deploying reusable rockets for missions such as launching satellites and restocking the International Space Station.It also operates the Starlink satellite high-speed internet service.
SpaceX made about $8bn in profit on $15bn to $16bn of revenue last year, according to Reuters,The addition of xAI adds narrative complexity to the SpaceX story, says Michael Sobel, the president and co-founder of Scenic Management, which buys secondary stakes in privately held companies and has invested in the AI company Anthropic,Sobel, who speaks to SpaceX investors regularly, says: “By folding in xAI, which carries a significant monthly cash burn, you change the financial profile of the company overnight,In the secondary market, ‘simple’ is usually rewarded,This merger requires investors to do a lot more homework on how xAI’s cash burn impacts SpaceX’s overall valuation and IPO timeline.
”There is also the added burden of X, a social media platform that is a regular subject of regulatory scrutiny and political ire,Nonetheless, Sobel adds, the argument in favour of the deal is compelling,“For a long-term investor, this secures the most advanced AI ‘brain’ for the most advanced hardware ‘body’ in existence,The upside is a $1,25tn entity that controls the entire stack, from the launchpad to the neural network.
”Gerber, who invested in Musk’s original buyout of X in 2022 when the platform was better known as Twitter, says he welcomes the deal but is less sure about SpaceX investors.“For me as a Twitter shareholder, I could not be happier.I pretty much figured I had lost my money but that has now been parlayed into owning SpaceX shares.It’s awesome for me but if I was a SpaceX shareholder I would be pissed.”Musk owns about 44% of the newly enlarged SpaceX business and 17% of Tesla, where he is the chief executive.
Is the next step a combination of the two? Ives believes there is a “growing chance” that a one-stop shop for investing in Musk businesses will be created.“Musk wants to own and control more of the AI ecosystem and step by step the holy grail could be combining SpaceX and Tesla,” he says.Gerber believes the timing is right, with both companies currently worth $1.25tn.“This is the time to create a multitrillion-dollar company.
I know Elon.It’s going to happen,” he says.
Controversial YouTuber Jack Doherty barred from PGA Tour events after Phoenix Open disruption
A controversial livestreamer has been barred from attending PGA Tour events indefinitely after being removed from the Waste Management Phoenix Open, a person familiar with the matter told the Guardian, though the tour has declined to publicly confirm any specific disciplinary action.Security and law enforcement removed Jack Doherty from the tournament grounds on Friday after he appeared to pay a spectator to shout during a player’s pre-shot routine, according to videos circulating online and accounts of the incident.“The WM Phoenix Open is a bucket-list event with one of the most unique fan experiences in all of sport,” a tour spokesperson said. “The PGA Tour and the Thunderbirds are committed to protecting the integrity of the competition and providing an exceptional experience for all fans. Disruptive fan behavior will not be tolerated and anyone violating the Fan Code of Conduct is subject to immediate ejection
The world heard JD Vance being booed at the Olympics. Except for viewers in the US | Bryan Armen Graham
The modern Olympics sell themselves on a simple premise: the whole world, watching the same moment, at the same time. On Friday night in Milan, that illusion fractured in real time.When Team USA entered the San Siro during the parade of nations, the speed skater Erin Jackson led the delegation into a wall of cheers. Moments later, when cameras cut to US vice-president JD Vance and second lady Usha Vance, large sections of the crowd responded with boos. Not subtle ones, but audible and sustained ones
Valentino Guseli’s unexpected big air dream ends without a medal in all-or-nothing final: ‘I left it all out there’
The snowboarding star Valentino Guseli has fallen short in his unexpected bid to win Australia’s first medal of the Winter Olympics in Italy, stumbling on the landing twice in an all-or-nothing final.Guseli was looking to continue his fairytale start to the Milano Cortina Games after he qualified for the big air final in “insane” fashion.But the 20-year-old was was unable to stick the landing on two of his jumps in the final on Saturday night in Livigno and finished 10th.Japan’s Kira Kimura won gold ahead of countryman Ryoma Kimata, with China’s defending Olympic champion Su Yiming third.“I couldn’t have tried harder or wanted it more so yeah, no regrets,” Guseli said after the event
Winter Olympics 2026: speed skating gold for Italy, Cas upholds ban on GB skeleton helmets and more – as it happened
That’s it for today’s live blog. Thanks for following along and we’ll be back tomorrow with Geoff Lemon on the first shift.The picture desk have been beavering away to compile the best images from the opening day of the Games. Here’s a look at a few stunning snaps from the curling, downhill skiing, and ice hockey:Here’s a few of the big storylines from today:Italy got their first gold of the Games as 35-year-old Francesca Lollobrigida won the 3,000m speed skatingKira Kimura won gold in the men’s snowboarding big air, he saved his best run until last, posting a 90.50 on his third jump to pip Japanese teammate Riyoma KimataNorway’s Anna Odine Strøm won gold in the women’s normal hill ski jumpTeam GB’s mixed doubles curling team saw off Canada and USA to remain unbeaten
Cortina awakens to embrace competitive curling couples and Vonn’s valiant gold bid | Andy Bull
The sun rises late in Cortina d’Ampezzo, like everything else in this little alpine town. It’s gone eight o’clock in the morning by the time the daylight has made it over the high peaks to the east, and it’s another two hours from that before the Olympic day gets under way.It’s slow out, as if everyone’s still sleeping off the night before, when the town was out cheering for the athletes as they made their parade around the square. The police are still packing away all the railings, and the street sweeps are brushing up the confetti. Non c’è fretta
Wales’ woes are not just for their team and fans, but a crisis for the Six Nations | Michael Aylwin
England did not play all that well in thrashing Wales and it is hard to see how the visitors pull themselves out of the rutEngland really didn’t play that well. Certainly, if the number of points left out there is any guide. There were times in the first half, that part of the game when both teams are meant to be still in it, when it seemed as if scoring a try just required the hosts to string enough passes together.Fair enough, they did score four in the first half alone, but two of them, the second and third, came when Wales were down to 13. So, yeah, string enough passes together …We are quibbling, obviously, but paving the way for the real story here, which is Wales
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