Elon

Musk says solar powered and space-based data centres are the only way to meet AI’s burgeoning energy demands.

Elon Musk’s SpaceX has acquired his AI company xAI as part of an ambitious scheme to build space-based data centres to power the future of artificial intelligence.

The billionaire, who is also the CEO of Tesla, announced the merger in a statement on Tuesday on the SpaceX website.

Musk said the merger will help to address the emerging question of how to meet the power-hungry demands of artificial intelligence.

AI demand will require “immense amounts of power and cooling” that are not sustainable on Earth without “imposing hardship on communities and the environment,” he said.

Space-based data centres that harness the power of the Sun are the only long-term solution, according to Musk.

“In the long term, space-based AI is obviously the only way to scale. To harness even a millionth of our Sun’s energy would require over a million times more energy than our civilisation currently uses!” he wrote.

“The only logical solution therefore is to transport these resource-intensive efforts to a location with vast power and space,” he continued, predicting that within the next “2 to 3 years, the lowest cost way to generate AI compute will be in space”.

The merger of SpaceX and xAI will bring several of Musk’s space, artificial intelligence, internet, and social media projects under one roof.

SpaceX operates the Falcon and Starship rocket programmes, while xAI is best known for developing the AI-powered Grok chatbot. Last year, xAI also acquired X, the social media platform known as Twitter, until it was bought by Musk in late 2022.

Both companies have major contracts with US government agencies such as NASA and the Department of Defense .

SpaceX’s Starshield unit specifically collaborates with government entities, including military and intelligence agencies.

Musk is not the only tech CEO looking to space as a solution to AI’s energy quandary.

Jeff Bezos’s Blue Origin and Google’s Project Suncatcher are both working on solar-powered space-based data centres.

“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,” Musk wrote.

Musk also said his long-term plan for SpaceX is to launch a million satellites.

To achieve this aim, SpaceX’s Starship rocket programme aims to one day launch one flight per hour with a 200-tonne payload, he said.

Musk said Starlink, a subsidiary of SpaceX that offers satellite-based internet service, will soon get a major boost with the launch of SpaceX’s next generation of V3 satellites.

They will each add “more than 20 times the capacity to the constellation as the current Falcon launches of the V2 Starlink satellites”, he wrote.

Musk’s electric car company says it will invest $2bn in artificial intelligence start-up as part of pivot away from auto market.

Tesla has reported its first-ever decline in annual revenue on a busy day for corporate earnings that also saw the release of results from Microsoft, Meta and Samsung Electronics.

Elon Musk’s electric car company said on Wednesday that revenue fell 3 percent year-on-year to $24.9bn in the final quarter of 2025. Revenue for all of 2025 was $94.8bn, down from $97.7bn the previous year.

Net profit fell 61 percent to $840m in the quarter, taking profit for the year to $3.8bn, down sharply from $7.1bn in 2024.

The Austin, Texas-based company also revealed that it had agreed to invest $2bn in Musk’s artificial intelligence start-up xAI – the developer of Musk’s controversial Grok chatbot – as part of a push to lessen its reliance on the auto market.

“Together, the investment and the related framework agreement are intended to enhance Tesla’s ability to develop and deploy AI products and services into the physical world at scale,” the company said in its earnings report.

Tesla shares rose about 2.2 percent in after-hours trading.

Also on Wednesday, tech giants Microsoft, Meta and Samsung reported strong earnings in their latest reports to shareholders.

Meta, the parent company of Facebook and Instagram, reported a profit of $22.8bn on revenue of $59.9bn in the October-December period, a 6 percent rise year-on-year.

Meta shares surged nearly 7 percent in extended-hours trading.

Microsoft said profit rose 60 percent to $38.5bn in the final quarter, based on revenue of $81.3bn.

“We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises,” Microsoft CEO Satya Nadella said in a statement.

“We are pushing the frontier across our entire AI stack to drive new value for our customers and partners.”

Despite its strong earnings, Microsoft’s announcement that capital spending hit a record $37.5bn in the second quarter stoked fears of an AI investment bubble, sending stock prices sharply lower.

Microsoft’s shares fell more than 6 percent in after-hours trading on Wednesday.

Samsung Electronics, the biggest producer of memory chips globally, reported a profit of 20.1 trillion won ($13.98bn) on revenue of 93.8 trillion won ($65.6bn), a more than three-fold rise from the previous year.