What to know about Elon Musk's merger of SpaceX with his AI company

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Elon Musk recently announced what seemed like an odd pairing of his companies: SpaceX was acquiring xAI, the artificial intelligence firm that also owns the social media platform X.The merger combines a highly profitable rocket company with an AI startup that is burning through billions of dollars as it competes with OpenAI and other rivals for dominance in artificial intelligence.The merger also comes as SpaceX — whose primary business of late has been launching Musk’s Starlink broadband satellites — readies for an initial public offering, possibly for this year.Business Elon Musk’s SpaceX is eyeing an initial public offering that could be the largest ever, at least partially driven by a plan to launch AI data centers into orbit.The merged companies are valued at $1.25 trillion.

That is higher than recent separate valuations of SpaceX at $800 billion and xAI‘s holding company at $230 billion.IPO shares are expected to price at roughly $525.“I think it provides a narrative for the merging of SpaceX and xAI, sort of a cash generative business and a business that needs cash — at a pretty spectacularly high valuation,” said Steve Collar, chairman of Swissto12, a Swiss satellite maker.Although the merger may make financial sense, there is far more to it than that.

Here’s what to know about the plan.This seems like an unlikely marriage.

Why is Musk doing this? Aside from the financial benefits, there are technical reasons.Musk has sketched out a futuristic plan that involves sending up to a million satellites — called data centers — into an orbit, where the sun could power them all day and night while they do artificial intelligence computations.What exactly is a satellite data center?The basic concept is simple.

The satellite’s primary function would be to do computations on specialized chips, powered by solar panels in a “sun-synchronous orbit” that ke...