Elon Musk's SpaceX acquires xAI, plans to build data centres in space

SpaceX has acquired AI company xAI, CEO Elon Musk announced in a memo, outlining plans to develop large-scale, space-based AI computing systems powered by solar energy.

The acquisition would combine SpaceX’s launch capabilities, satellite networks and communications systems with xAI’s AI work. He described the move as a step toward building what he called a vertically integrated technology platform spanning AI, space transportation and global connectivity.

Musk argued that current AI development depends heavily on large data centres on Earth, which require significant electricity and cooling. He said meeting future AI power demands through terrestrial infrastructure would strain communities and the environment.

“In the long term, space-based AI is obviously the only way to scale,” Musk wrote.

Musk outlined a plan to deploy large numbers of satellites that would function as orbital data centres. He said launching “a constellation of a million satellites that operate as orbital data centers” would be an initial step toward what he described as a Kardashev Type II civilisation, capable of harnessing energy on a planetary scale.

The memo noted that existing launch systems have historically limited how much material can be placed into orbit. In 2025, which Musk called the most active year for orbital launches, about 3,000 tons of payload reached orbit, largely made up of Starlink satellites launched by SpaceX’s Falcon rockets.

The need to deploy large numbers of satellites drove improvements in the Falcon program and is now shaping the development of the larger Starship vehicle. Starship will begin launching upgraded Starlink satellites this year, each flight adding significantly more capacity than current Falcon launches. The company would deploy next-generation satellites designed to provide direct cellular coverage to mobile phones worldwide.

Future Starship operations could involve launches as frequently as once per hour, carrying up to 200 tons per flight, enabling the delivery of millions of tons of material into orbit annually.

“The basic math is that launching a million tons per year of satellites generating 100 kW of compute power per ton would add 100 gigawatts of AI compute capacity annually,” he wrote, adding that there is “a path to launching 1 TW/year from Earth.”

Musk estimated that within two to three years, generating AI computing power in space could become cheaper than Earth-based alternatives.

“This cost-efficiency alone will enable innovative companies to forge ahead in training their AI models and processing data at unprecedented speeds and scales,” he wrote.

The planned satellite systems would follow space sustainability practices already used by SpaceX, including end-of-life disposal procedures.

Looking beyond Earth orbit, Musk said Starship could support large-scale operations on the Moon, including cargo landings and manufacturing using lunar resources. He suggested that satellites built on the Moon and launched into deep space could dramatically expand AI computing capacity and energy use.

SpaceX is currently trying to prove that its Starship rocket can carry astronauts to the moon and Mars, while xAI is competing with AI companies like Google and OpenAI.