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On June 25, 2024, a SpaceX Falcon Heavy rocket carrying the National Oceanic and Atmospheric Administration (NOAA) weather satellite Geostationary Operational Environmental Satellite-U (GOES-U) lifted off from Launch Complex 39A at NASA’s Kennedy Space Center in Florida.
Miguel J. Rodriguez Carrillo | Miguel J. Rodriguez Carrillo AFP | Getty Images
Elon Musk Rocket maker SpaceX is merging with its artificial intelligence startup xAI, with the combined entity preparing for a massive IPO.
The deal was announced in a statement on Monday blog post Musk said he is building “the most ambitious, vertically integrated innovation engine on Earth (and beyond)” through artificial intelligence, rockets, space-based internet and the X social media platform.
The combined company is expected to price in an IPO at a valuation of $1.25 trillion, according to Bloomberg. Nevada public records obtained by CNBC show the deal closed on February 2, with Space Exploration Technologies Corp. listed as the company’s “managing member.” AI holding.
The deal marks the largest collaboration in Musk’s vast business portfolio and brings together two companies that have been soaring in value in private markets. SpaceX conducted a secondary stock sale last year at an $800 billion valuation, while xAI was valued at about $230 billion in a $20 billion funding round. closure earlier this year.
Investors in the latest round of xAI funding include NVIDIA and Cisco Investmentas well as longtime backers of Musk’s companies Valor Equity Partners, Stepstone Group, Fidelity, Qatar Investment Authority, Abu Dhabi’s MGX and Baron Capital Group.
TeslaMusk’s electric car maker and the source of much of his liquid wealth, said last week The company also invested about $2 billion in xAI.
Executives from SpaceX and xAI did not respond to requests for comment on whether the merger would require regulatory review such as the Committee on Foreign Investment in the United States (CFIUS).
Early last year, Musk expanded xAI by merging it with his social network X (formerly Twitter). Now xAI is facing regulatory investigations in multiple international jurisdictions, Its Grok AI tool enables users to generate and share sexualized images of children as well as intimate images of non-consensing adults, primarily women.
January, The Department of Defense begins using Grok within the Pentagon. The U.S. Department of Defense allows the use of Grok, Google’s Gemini and other artificial intelligence-based systems to analyze information flowing through its military intelligence databases.
Today, SpaceX is a much larger defense contractor than xAI, with federal government contracts worth tens of billions of dollars.
Started twenty years apart
Musk founded the reusable rocket maker in 2002 and grew it into a leading provider of orbital launch services through contracts with NASA and the Department of Defense. SpaceX also owns and operates the Starlink satellite internet service, which has more than 9,000 satellites in orbit and approximately 9 million customers.
In 2023, Musk launched xAI as a potential competitor of OpenAI. With the release of ChatGPT at the end of last year, OpenAI started the generative AI boom. Musk was a co-founder of OpenAI in 2015, when the project launched as a nonprofit artificial intelligence lab. He left in 2018 and is embroiled in a bitter legal dispute with the company and its chief executive, Sam Altman.
Reuters reported late last week that SpaceX expected to earn $8 billion in revenue by 2025, with revenue of $15 billion to $16 billion.
Meanwhile, xAI’s financial position is even more fragile as the cash-burning company tries to build out expensive infrastructure to keep up with OpenAI and Googlethey were early to the advent of artificial intelligence and are leading the race to build the most widely used models.
The Starlink logo appears on a smartphone screen with a starry night sky in the background.
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Musk sees the deal as part of a future strategic plan to put data centers into space. SpaceX recently asked the Federal Communications Commission for authorization to launch up to 1 million satellites as part of its “orbital data center.”
“My estimate is that within 2 to 3 years, the least computationally expensive way to generate artificial intelligence will be in space,” Musk wrote in a post on Monday. “This cost efficiency alone is enough to enable innovative companies to train artificial intelligence models and process data at unprecedented speed and scale, accelerating breakthroughs in our understanding of physics and technological inventions to benefit humanity.”
Grok isn’t the only source of controversy over xAI. The company has faced significant community backlash in and around Memphis, Tennessee, where it is building infrastructure, starting with the Colossus facility.
The NAACP and Memphis environmental groups are trying to prevent xAI from using gas turbines to power supercomputer facilities in the region, where residents complain the emissions add to air pollution problems. In nearby South Hills, Mississippi, where xAI is building more data infrastructure, the community has protested Noise level from its equipment.
