Why has Elon Musk merged his rocket company with his AI startup?

"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."

The transaction combines a rocket company and an artificial intelligence startup into a $1.25tn business, valuing SpaceX at $1tn and xAI at $250bn with a planned stock market flotation in June. A central rationale is shifting datacentres into space to reduce dependence on energy-intensive earth-bound facilities by deploying up to a million solar-powered satellites as distributed orbital datacentres. Current satellite compute limits and the necessity of a planet-wide distributed computer are cited as constraints. Connection quality between orbiting devices, solar radiation, routine maintenance, component failure, and the high cost and complexity of shipping and fitting parts in space pose major technological and operational challenges. Questions remain over benefits to non-controlling shareholders.

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