SpaceX has acquired artificial intelligence company xAI as part of a push to combine the two companies under a single corporate structure to integrate AI development with space launch, satellite-based communications and related infrastructure.
As SpaceX moves to integrate AI with space-based infrastructure, government and industry leaders continue to assess how AI will shape national security, defense operations and federal missions. These issues and their implications for the public sector will be explored at the Potomac Officers Club’s 2026 Artificial Intelligence Summit on March 18. Register now and join senior decision-makers and technology experts for in-depth discussions on the future of AI in government.
In a statement published Monday, SpaceX CEO Elon Musk said the transaction aims to establish a vertically integrated platform combining AI, space-based internet, rockets, direct-to-mobile communications and an information platform.
According to Musk, the move reflects concerns about the growing reliance of AI systems on terrestrial data centers, which require large amounts of electricity and cooling capacity.
“Global electricity demand for AI simply cannot be met with terrestrial solutions, even in the near term, without imposing hardship on communities and the environment,” he added.
What Is SpaceX’s Approach to Space-Based AI?
Musk stated that space-based AI infrastructure could be a long-term alternative to Earth-based data centers. He said satellites operating in orbit can take advantage of near-continuous solar power and reduced environmental constraints compared to terrestrial facilities.
The chief executive noted that relocating compute-intensive workloads to space could enable AI systems to scale without relying solely on ground-based power generation and cooling.
How Could SpaceX Use Orbital Data Centers to Support AI Compute?
In his announcement, Musk discussed a concept for deploying large numbers of satellites designed to function as orbital data centers. The company said such systems would rely on high-capacity launch vehicles to place significant mass into orbit, a capability it is developing through its Starship launch vehicle program.
He stated that the Starship rocket is expected to deliver larger and more capable satellites, including V3 Starlink systems and direct-to-mobile satellites with increased payload capacity per launch.
According to Musk, deploying 1 million tons of satellites per year could add about 100 gigawatts of AI computing capacity, with the potential to scale to 1 terawatt annually.
“My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space,” he wrote. “This cost-efficiency alone will enable innovative companies to forge ahead in training their AI models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and invention of technologies to benefit humanity.”
What Does xAI Actually Do?
Founded in 2023, xAI is a California-based company working in the area of AI, social media and technology.
In July 2025, Musk’s AI startup launched a suite of frontier AI products designed to support the critical missions of the U.S. government.
Under the OneGov initiative, the General Services Administration and xAI signed an agreement in September to make the latter’s Grok frontier AI models available to federal agencies through March 2027.
In December, the Department of War entered into an agreement with xAI to facilitate the deployment of the company’s frontier-grade capabilities on DOW’s bespoke AI platform, GenAI.mil.
