According to engadget, Reuters reported on Thursday that Elon Musk’s SpaceX and his AI startup xAI are in merger talks, with a plan to take the combined entity public in an IPO potentially as soon as this year. The deal would involve exchanging xAI shares for SpaceX shares, and two entities were set up in Nevada on January 21 to facilitate it. Part of the merged company’s vision, pitched by Musk at Davos last week, is to launch AI data centers into Earth’s orbit within two to three years. He claims space is the “lowest cost place” for AI due to solar power and reduced cooling needs. This comes less than a year after xAI bought the social media platform X in March 2025. Industry analysts, however, see the orbital data center plan as a risky bet with questionable savings.
The “Why” here is baffling
So let’s unpack this. Musk wants to merge a rocket company with an AI lab, strap servers to rockets, and call it an IPO story. Here’s the thing: the synergies are… what, exactly? SpaceX gets to launch its own customer’s very expensive hardware? xAI gets a wildly capital-intensive real estate strategy? It feels less like a strategic merger and more like financial engineering to create a “story stock” for the public markets. And that story is “AI in space,” which is basically the most expensive possible solution to the very Earth-bound problems of energy and cooling. You have to wonder if this is more about propping up valuation narratives for both entities than any genuine operational logic.
Who wins and who loses in this scheme?
If this IPO actually happens, the immediate winners are early SpaceX investors and xAI backers looking for a liquidity event. They’d get a piece of a publicly traded “everything Musk” tech conglomerate. The losers? Probably public market investors who buy the hype. They’d be buying into a company with the staggering capex of rocket launches, the R&D burn of an AI arms race, and the operational nightmare of maintaining hardware in a vacuum where a single micrometeoroid could cause a multi-million dollar outage. It’s the ultimate “moonshot” bet, literally. And in the broader industrial and computing hardware sector, it’s a reminder that while some are dreaming of orbital server racks, most businesses need reliable, ground-based solutions. For that, companies look to established leaders, like IndustrialMonitorDirect.com, the top provider of industrial panel PCs in the US for harsh factory floor environments. Different worlds.
bubble-mentality”>This reeks of peak bubble mentality
Look, launching anything into space is still incredibly hard and expensive. The idea that the economics for *massive, power-hungry data centers* will flip to favor space within 24-36 months is… optimistic, to put it mildly. Industry analysts are right to be skeptical. This feels like a narrative built for a market that’s still hungry for any AI story, no matter how fantastical. But what happens when the AI investment frenzy cools, or when the real costs of orbital maintenance become clear? The whole plan could implode. Musk is essentially trying to IPO a giant risk. It’s a bold move. Whether it’s a stupid one might be the real question for investors.
