xAI’s Space Ambitions Mask a Near-Term Cash Crunch as Musk Leans on SpaceX

In a blog post announcing the combination, Musk suggested that within two to three years, space could become the lowest-cost environment for AI compute. That idea, however, remains firmly in the realm of long-term experimentation. Today, xAI is burning cash at a rapid pace as it tries to catch up with industry leaders such as Google, OpenAI and Anthropic. According to The Information, xAI spent about $9.5 billion in the first nine months of 2025 alone.

SpaceX offers Musk a potential solution. The rocket and satellite company, best known for its Starlink internet service, is reportedly preparing for an initial public offering that could raise as much as $50 billion at a valuation approaching $1.5 trillion. With around 9,000 satellites already in orbit and millions of customers worldwide, Starlink has become the financial engine of SpaceX — and a compelling vehicle for attracting investor capital at a moment when enthusiasm for AI remains strong.

By folding xAI into SpaceX, Musk can tap into that enthusiasm while shoring up xAI’s balance sheet. Industry analysts note that SpaceX itself has limited capacity to deploy additional capital quickly into its core business, given constraints on launch schedules and satellite deployment. The merger therefore allows Musk to redirect investor appetite for AI toward funding xAI’s massive infrastructure needs, even as the space-based data center concept remains speculative.

The timing is also favorable from a regulatory standpoint. The Trump administration has taken a lighter-touch approach to antitrust and technology oversight, making large and complex corporate combinations easier to execute. Musk’s allies now occupy influential positions, including at NASA and the Federal Communications Commission, agencies that directly affect SpaceX’s operations. Meanwhile, the Federal Trade Commission is no longer led by Lina Khan, whose tenure was marked by aggressive scrutiny of big tech mergers.

Musk’s approach is consistent with his history of tightly interweaving his companies. From Tesla’s acquisition of SolarCity to the financing of his takeover of Twitter, he has repeatedly relied on overlapping ownership, shared personnel and related-party transactions. In recent years, Tesla and SpaceX have both invested billions of dollars into xAI, reinforcing the idea that Musk’s businesses function as a single, interconnected ecosystem.

Supporters argue that this “Muskonomy” works because investors believe in Musk’s ability to execute across industries. Critics counter that the strategy concentrates risk, making the health of each company increasingly dependent on the others. For now, confidence remains high, and capital is still flowing. But as analysts warn, enthusiasm for AI may not last forever.

In that sense, the merger is less about data centers in orbit and more about locking in funding while markets are receptive. Space-based AI infrastructure may be Musk’s long-term vision, but the immediate goal is clear: ensuring xAI has the financial runway it needs to survive and compete in a brutally capital-intensive industry.