SpaceX launches 20 Starlink satellites on Dec. 4. Photo: SpaceX

SpaceX has acquired Elon Musk’s AI venture xAI, the company confirmed in a statement, detailing plans to launch an orbital data center constellation. 

The announcement came after reports that the merger was a possibility ahead of an initial public offering (IPO) for SpaceX. On Friday, SpaceX asked the FCC for authority to launch a constellation of satellites to function as data centers in orbit in a new filing on Friday for “up to 1 million” satellites. 

“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,” SpaceX and xAI founder Elon Musk said in a statement announcing the deal. 

xAI’s business includes social media platform X, formerly known as Twitter, after xAI acquired it last year.

Funding this type of orbital data center constellation has been cited as part of the rationale for SpaceX to go public. Analysts have noted there are many engineering challenges to orbital data centers like latency and the challenges of computing hardware in space. 

In in the FCC filing, SpaceX described the system as “up to 1 million satellites.” It’s described as a high-bandwidth, optically linked constellation of solar-powered satellites “with unprecedented computing capacity to power advanced artificial intelligence models and the applications that rely on them.”

According to the filing, these satellites would operate between 500 km and 2,000 km altitude and 30 degrees and Sun-Synchronous Orbit inclinations (SSO). SpaceX said it plans to design different versions of the satellites for different orbital shells. 

The FCC filing does not include timeline targets of when SpaceX would plan to deploy the constellation. 

The filing sets out massive projections that launching 1 million tonnes per year of satellites would be able to generate 100 kW of compute power per tonne, which SpaceX estimates would result in 100 gigawatts of AI compute capacity annually. 

“Freed from the constraints of terrestrial deployment, within a few years the lowest cost to generate AI compute will be in space,” SpaceX said in the filing. “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 machine learning, autonomous systems, and predictive analytics to benefit humanity.” 

Analyst Tim Farrar has called orbital data centers a “Rorschach test” for potential investors, telling Via Satellite it’s the type of future that could increase the value of an IPO. 

“How has Tesla managed to maintain its level of valuation in recent years when the demand for its cars has slowed? The parallels are there. You keep coming up with stories about future opportunities: what Starship is going to do, colonization of Mars, orbital data centers. Don’t look too closely at the here and now,” Farrar said in recent coverage of SpaceX’s IPO plans.

“The core Starlink business is not particularly supportive of a $1.5 trillion valuation, so you have to look to these future, more speculative opportunities and belief in Elon Musk as a justification,” he added. 

Kimberly Siversen Burke, director of Government Affairs for Quilty Space, told Via Satellite that as a near-term revenue driver, orbital data centers “remain speculative,” citing unproven economics, aging chips, latency, and limited use cases like defense, remote sensing, and sovereign compute.

Burke added that orbital compute ambitions cast future upside for SpaceX. 

“Linking SpaceX to AI infrastructure demand, with xAI as the implicit internal anchor customer, gives SpaceX valuation scaffolding and positions space-based compute as a plausible solution to the limits AI is starting to run into on Earth. It’s all very on-brand for Musk – not pitching something fully baked, but pulling the future close enough for the market to price it in,” Burke said in the IPO discussion. 

Earlier this month, SpaceX received approval from the FCC related to the Starlink constellation. The FCC approved SpaceX to deploy 7,500 more Gen2 Starlink satellites while allowing Starlink to operate in more frequencies and waive satellite power limits inside the United States.

Editor’s note: This story was updated after publication on Feb. 2 with news that the merger had taken place.