Elon Musk’s ambitious plan to merge SpaceX with his artificial intelligence venture, xAI, is ostensibly aimed at developing “orbital data centers” for a future vision of computing. However, the immediate and pressing reality for xAI is the urgent need for substantial capital to compete in the rapidly expanding generative AI sector.
xAI, despite being a relatively young company, requires immense financial resources to build the infrastructure necessary to challenge established players like Google, OpenAI, and Anthropic. Musk estimates that within two to three years, the most cost-effective way to generate AI compute power will be from orbital platforms. This strategic pivot suggests a long-term play for xAI, leveraging SpaceX’s expertise in space technology.
SpaceX, reportedly preparing for a potentially record-breaking IPO with a valuation that could reach $1.5 trillion, presents Musk with a clear avenue to secure the necessary funding. A key component of SpaceX’s growth strategy is its Starlink satellite internet service, which currently boasts approximately 9,000 satellites in orbit and serves around 9 million customers. The company recently received approval from the Federal Communications Commission to deploy an additional 7,500 satellites.
According to Tim Farrar, president of satellite and telecom industry research firm TMF Associates, SpaceX’s capacity to deploy capital into its existing Starlink business is constrained by the limited number of annual rocket launch slots available. By integrating xAI into SpaceX, Musk can tap into the robust investor appetite for AI ventures, simultaneously shoring up xAI’s financial standing amidst significant operational expenditures. Reports indicate that xAI incurred approximately $9.5 billion in losses during the first nine months of 2025.
“There’s a significant influx of capital into AI companies at the moment,” Farrar observed. “Securing funding now is feasible, but that window might not remain open indefinitely.”
Earlier this year, xAI successfully closed a $20 billion funding round at a valuation of around $230 billion. In comparison, OpenAI was valued at $500 billion in October and is reportedly seeking to increase this to $750 billion in its next funding round, while Anthropic has recently agreed to terms for a funding round that values the company at $350 billion.
Adding to the favorable financial landscape, the current regulatory environment, particularly under the Trump administration, appears to be advantageous for such a merger. The absence of any mention of regulatory approval in the announcement and the completion of the deal, as indicated by Nevada state records, suggest a streamlined process. SpaceX is now officially listed as the “managing member” of X.AI Holdings.
Key appointments within regulatory bodies and governmental agencies further underscore this supportive environment. Jared Isaacman, a former SpaceX investor and associate of Musk, now heads NASA and has advocated for increased SpaceX contracts. At the FCC, Chairman Brendan Carr has been a vocal supporter of SpaceX’s Starlink initiative.
The broader regulatory climate for tech mergers has also shifted. With Donald Trump in the White House and Republican control of Congress, the Federal Trade Commission, now led by a Trump appointee, is perceived as less inclined to block major tech deals compared to its predecessor. David Sacks, a long-time associate of Musk and the White House crypto and AI czar, has been instrumental in advocating for reduced oversight of AI labs, promoting aggressive growth strategies. An executive order signed in December established a unified national AI regulatory framework, preempting individual state regulations and emphasizing the need for innovation without burdensome constraints.
Musk’s rapid execution of this merger aligns with his established pattern of intermingling resources and consolidating his ventures. This includes the 2016 acquisition of SolarCity by Tesla, a move that rescued the solar company from a liquidity crisis. During his acquisition of Twitter, Musk financed the deal by selling billions of dollars worth of Tesla shares and drawing personnel from his other companies.
Tesla has a history of related-party transactions with SpaceX and now xAI. For instance, Tesla has supplied car parts and solar equipment to SpaceX, and the automaker collaborated with SpaceX on a specialized alloy for its Cybertruck. In 2025, Tesla sold $430 million worth of its Megapack battery systems to xAI, representing approximately 3.4% of Tesla’s energy business revenue for the year, which will power xAI’s data infrastructure. Prior to this, Tesla announced a $2 billion investment in xAI, and SpaceX reportedly made a similar $2 billion investment in July 2025.
Farrar suggests that the loyalty of Musk’s investors, who have consistently supported his interwoven business strategies, contributes to the stability of this complex financial ecosystem, often referred to as the “Muskonomy.” The confidence in Musk himself is paramount, as any failure within his empire could have cascading negative effects across his entire portfolio.
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