Elon Musk is merging SpaceX and xAI to build data centers in space — or so he says

On Monday, Elon Musk announced that he was merging 2 of his companies, SpaceX and xAI, successful a woody said to beryllium worthy $1.25 trillion. The reason, Musk said successful an announcement, was that successful bid for AI to grow, it needed to spell to space.

AI relies connected “large terrestrial information centers” that tally connected “immense amounts of powerfulness and cooling,” he said, which comes astatine awesome disbursal to the situation and organization opposition. The solution: information centers successful space. “In the agelong term, space-based AI is evidently the only measurement to scale,” Musk said.

On the surface, it sounds for illustration a logical solution to the unsocial problem presented by power-hungry information centers. Local communities are rising up against information halfway projects complete concerns astir energy demand, h2o usage, and rising inferior rates. Launching those information centers into abstraction intends they are not taking up immoderate abstraction connected Earth, and successful a sun-synchronous orbit location is the readiness of star energy.

But there’s another, simpler measurement of looking astatine Musk’s merger: SpaceX is profitable, and xAI is not. Not only is xAI not profitable, it’s successful the midst of a superior rate pain arsenic it races to compete pinch well-financed rivals for illustration Google and OpenAI. As Bloomberg precocious reported, the AI institution is burning astir $1 cardinal a period arsenic it spends heavy to build information centers, enlistee talent, and tally the societal media level X.

Meanwhile, SpaceX generated astir $8 cardinal successful profit connected an estimated $16 cardinal of gross ​last year, Reuters reported. The main gross driver is Starlink, which accounts for up to 80 percent of the company’s revenue. Since 2019, SpaceX has launched complete 9,500 satellites and boasts up to 9 cardinal broadband net users. The institution is besides a awesome authorities contractor, having secured complete $20 cardinal successful NASA and Defense Department deals since 2008. When it goes nationalist later this year, SpaceX is expected to raise up to $50 cardinal successful investment.

Meanwhile, xAI has it ain authorities tie-ups. The Department of Defense is utilizing Grok, successful summation to different chatbots, to analyse accusation that flows done its subject intelligence networks.

It’s not clear really investors will consciousness astir merging the cash-burning xAI pinch the profitable SpaceX. But it’s important to statement that Musk has done this before, erstwhile he merged the debt-ridden SolarCity pinch Tesla successful 2016. Since Musk was the largest shareholder and president of some Tesla and SolarCity, shareholders sued to artifact the merger, alleging it was a $2.6 cardinal “bailout” of a cash-strapped, struggling company. Musk yet won the lawsuit, pinch a judge ruling that he did not unit Tesla to overpay for SolarCity.

Musk now faces a caller suit from Tesla shareholders complete his creation of xAI. The suit alleges that Musk breached his fiduciary work to Tesla by forming xAI, which competes pinch the automaker for AI talent, resources, and Musk’s attention. The news that SpaceX is acquiring xAI surely won’t settee those concerns; if anything, it makes it much chaotic and complex.

So wherever does this each time off Tesla? In the astir caller net report, Tesla said it was investing $2 cardinal into xAI “to heighten Tesla’s expertise to create and deploy AI products and services into the beingness world astatine scale.” Grok, xAI’s chatbot that’s currently nether investigation successful aggregate countries for generating nonconsensual sexualized images of people, including children, was precocious integrated into definite Tesla vehicles arsenic a sound assistant. Grok besides lags down OpenAI’s ChatGPT, Google’s Gemini, Anthropic’s Claude, and different ample connection models successful respective cardinal metrics.

Data centers successful abstraction is axenic Musk futurism that has nary guarantee of success. It’s not arsenic elemental arsenic conscionable strapping a GPU to a rocket and hitting “launch.” First off, GPUs are full powerfulness hogs. Unless you’ve sewage a atomic reactor floating up there, you’re going to request a monolithic star arrays to powerfulness it. Then there’s the connection situation; moreover if you’re hitching a thrust connected Starlink, you still person to fig retired the fund for sending info backmost and distant to Earth. Eventually, the numbers commencement to look beautiful scary.

Musk says merging SpaceX and xAI is the measurement to make it happen. And possibly 1 time he’ll return the proposal of bullish investors to harvester each his companies, including Tesla, Neuralink, and the Boring Company, into 1 massive, Musk-run mega-corporation: Musk Inc., if you will. How will Tesla shareholders react?

“Tesla is Musk’s liquid piggy bank, since it’s publically traded; his different companies are not,” Tesla investor James McRitchie said during a prevote position earlier the company’s 2024 shareholder meeting, according to The Wall Street Journal. “Either he sticks astir agelong capable to usage our shareholder superior to money his different ventures, aliases he shifts his attraction sooner if we cull his salary package and move disconnected the money tap.”