The move aims to create a unified entity focused on developing space-based data centers for artificial intelligence.

Musk announced the acquisition in a statement posted on the SpaceX website on Monday.

The billionaire, who also serves as CEO of Tesla, described the combination as forming "the most ambitious, vertically-integrated innovation engine on (and off) Earth, with A.I., rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform."

Musk emphasized that the merger addresses the massive energy requirements of advancing AI.

He stated that current AI progress depends on large terrestrial data centers, which demand immense amounts of power and cooling.

Musk warned that such demands are not sustainable on Earth without imposing hardship on communities and the environment.

Musk Advocates for Orbital Solutions

Space-based data centers powered by solar energy represent the only viable long-term solution, according to Musk.

"In the long term, space-based AI is obviously the only way to scale," he wrote.

"To harness even a millionth of our Sun’s energy would require over a million times more energy than our civilization currently uses!"

"The only logical solution therefore is to transport these resource-intensive efforts to a location with vast power and space," he continued.

Musk predicted that within the next "2 to 3 years, the lowest cost way to generate AI compute will be in space."

The acquisition integrates several of Musk's key projects under one organization.

SpaceX leads the Falcon and Starship rocket programs, along with the Starlink satellite internet service.

xAI is known for developing the Grok AI chatbot.

Last year, xAI acquired the social media platform X, formerly Twitter, which Musk purchased in late 2022.

Both companies maintain significant contracts with US government agencies, including NASA and the Department of Defense.

SpaceX's Starshield division specifically works with military and intelligence entities.

Musk is not alone in exploring space-based options for AI's energy challenges.

Competitors such as Jeff Bezos's Blue Origin and Google's Project Suncatcher are pursuing similar solar-powered orbital data center concepts.

Musk highlighted the unprecedented scale required for such infrastructure.

"In the history of spaceflight, there has never been a vehicle capable of launching the megatons of mass that space-based data centres or permanent bases on the Moon and cities on Mars require," he wrote.

Musk outlined plans to deploy a million satellites to support these goals.

SpaceX's Starship program targets launching one flight per hour with 200-tonne payloads.

Starlink will gain substantial capacity from the upcoming V3 satellites.

Musk noted that each V3 satellite will add "more than 20 times the capacity to the constellation as the current Falcon launches of the V2 Starlink satellites."