“Jane! Stop this Crazy Thing!” Artificial Intelligence Antitrust Questions Get Extraterrestrial
SpaceX’s acquisition of xAI, valued at approximately $1.25 trillion, represents one of the most consequential mergers ever announced in the technology and aerospace sectors. This deal promises to be controversial, drawing parallels to another Musk-buys-Musk deal from a decade ago. The merger is likely to face significant pushback, rooted in antitrust and national security concerns.
Background of the Companies
Elon Musk founded SpaceX in 2002, owning 42% of its equity and holding 79% of voting rights. In March 2023, he established xAI, where he remains the CEO and majority owner. The deal merges SpaceX’s roughly $1 trillion valuation with xAI’s estimated $250 billion through a share-exchange transaction. This consolidation integrates launch dominance, global satellite communications, and next-generation artificial intelligence under one private enterprise, aiming to achieve Musk’s vision of a comprehensive space-based solar-powered AI-compute infrastructure.
Why SpaceX Says It Needs Orbital Compute
SpaceX pursued the acquisition because it believes that terrestrial data-center growth will soon encounter energy, land-use, and cooling constraints. Musk argues that the long-term, lowest-cost method of powering large-scale AI compute is to relocate it off Earth, where continuous solar power and natural radiative cooling facilitate hyperscale computing without the burdens imposed on terrestrial grids.
Musk expects orbital compute to become cost-competitive within a few years, with Starlink V3 satellites and future Starship-launched platforms serving as the backbone of this extraterrestrial AI infrastructure. The plan aims to combine Falcon and Starship for launch capacity, Starlink for in-orbit infrastructure, and Grok for AI models, along with planned orbital data-center constellations.
Concerns Raised by the SpaceX / xAI Deal
A merger of this magnitude raises immediate antitrust and national-security concerns in several areas:
- Federal contracts: SpaceX manages billions in contracts with NASA, the Department of Defense, and the intelligence community.
- Corporate governance: There are intertwined leadership roles and sensitive data flows across Musk’s companies.
- Market power: SpaceX’s ambition to deploy up to one million satellites for orbital AI computing could create structural advantages that are difficult for competitors to match.
- Global security power: Musk’s ownership of thousands of Starlink satellites gives him unique influence as a private actor in global security, affecting orbital safety and international strategic planning.
Competition in the Orbital Compute Space
The rapid consolidation of launch services, satellite networks, and AI development within SpaceX intensifies scrutiny regarding competition in the emerging market for orbital AI compute. Although several companies are exploring this space, none match SpaceX’s level of vertical integration.
Google is developing Project Suncatcher, aiming for a 2027 prototype constellation using satellite-borne TPUs to run AI workloads, but remains years away from operational orbital compute. Axiom Space is building dedicated orbital data-center modules, while Loft Orbital has flown multi-node AI compute systems in space. Amazon’s Project Kuiper is focused on broadband rather than compute, and startups like Starcloud have demonstrated in-orbit GPU operations but lack the capital for large-scale competition.
Historical Context: Tesla’s 2016 Acquisition of SolarCity
The SpaceX / xAI deal mirrors Musk’s previous acquisition of SolarCity by Tesla in 2016, which sparked corporate governance disputes. Tesla’s $2.6 billion acquisition of SolarCity, a distressed company, led to allegations of a conflicted bailout. The court ultimately ruled in favor of the deal, emphasizing the importance of conflict-management safeguards.
Antitrust Investigation Is Essential
The acquisition positions SpaceX at the center of a rapidly forming market for orbital AI compute. While Google stands as the strongest long-term contender, Axiom operates most maturely, and Loft leads in defense integration. SpaceX, however, is the only company that possesses proprietary launch capacity, operational broadband mega-constellations, and a formal FCC filing for a dedicated orbital compute constellation.
Speculation exists regarding a potential future merger with Tesla, which has invested $2 billion into xAI. This merger could potentially threaten rivals such as OpenAI.
In conclusion, the path to realizing Musk’s vision for an orbital solar-powered AI constellation is fraught with challenges. The substantial vertical integration and the merger that brings AI fully into the world’s most capable launch and satellite operator necessitate thorough examination by antitrust law enforcers.
