The 12-year quest behind the SpaceX-xAI merger: From a 2012 warning about AI destroying Mars colonies to a $1.25 trillion deal

Visions of multi-planetary civilization accompanied Musk’s 12-year quest that led to the the SpaceX-xAI merge.

Six weeks before announcing the SpaceX-xAI merger, Elon Musk sat in his Austin Gigafactory and explained why he’d reversed course on AI. “I finally came to the conclusion I can either be a spectator or a participant but I can’t stop it,” he told podcast host and futurist Peter Diamandis in December 2025. “So at least if I’m a participant I can try to steer it in a good direction.”

Two weeks before the merger, at Davos, Musk described his vision like this: “The image in my mind is a tiny candle in a vast darkness, tiny candle of consciousness, that could easily go out. That’s why it’s important to make life multi-planetary.”

On February 2, 2026, the pieces have come together. SpaceX announced its acquisition of xAI. The deal creates a combined entity valued at $1.25 trillion. The startup is likely the world’s most valuable private company, worth more than double the $500 billion valuation that made OpenAI the world’s most valuable startup just four months earlier.

The official rationale: “space-based AI data centers” to solve Earth’s energy constraints for AI training. “The lowest cost place to put AI will be space,” Musk said at Davos, “and that will be true within two years, maybe three.”

The visions of merging AI and interplanetary exploration are not new. According to OpenAI’s account, which Musk’s court filings omit, the succession discussion caught co-founders off guard: AGI governance would pass to his children in the form of an $80 billion .

The review mirror points to a more complicated picture. And so do thousands of pages of recently unsealed court documents from Musk v. OpenAI, the fraud case heading to jury trial in April before U.S. District Judge Yvonne Gonzalez Rogers in Oakland, California. And so does a conversation from 2012 that set Musk on a path to this moment that OpenAI posted to its website.

The efficiency problem

xAI is burning approximately $1 billion every month, which Musk disputes as “nonsense,” According to Bloomberg, the company’s projected 2025 losses reached $13 billion against roughly $500 million in revenue. That’s a burn-to-revenue ratio of approximately 26:1.

For comparison, OpenAI, itself hemorrhaging cash, generated $12-13 billion in revenue against approximately $9 billion in losses in 2025. That is a ratio of closer to 0.7:1. With 800-900 million weekly active users versus xAI’s 64 million monthly active users, OpenAI’s per-user economics are roughly an order of magnitude more efficient.

In December, Musk framed the competitive landscape bluntly: “My best guess is that xAI and Google will vie for primacy. And then at some point it’s going to be a competition with China.”

But by any standard efficiency metric, xAI is currently the least capital-efficient major AI lab in that race. The SpaceX merger provides two things xAI desperately needs: a path to the largest IPO in history, and a narrative that transforms a money-losing AI company into a visionary space-compute platform.

The question is why Musk would sustain those losses in the first place.

“Well, This Might Be True”

When DeepMind co-founder Demis Hassabis visited SpaceX headquarters in 2012, Musk proudly explained his Mars colonization plans as humanity’s “backup.” Hassabis’s response stopped him cold: the plan would only work “if superintelligent machines didn’t follow human beings on their trip to the planet.” AI accompanying humans, Hassabis warned, could lead to the colony’s destruction.

“[Musk] just hadn’t thought about this problem,” Hassabis later recalled. (Main source: Walter Isaacson’s Elon Musk biography (Simon & Schuster, 2023). “So he sat there for a minute, said nothing, and just thought, ‘Well, this might be true.'”

Musk invested in DeepMind shortly after. When Google acquired it in 2014 for $500 million, Musk tried desperately to prevent the deal, reportedly offering as much as 5% of Tesla to acquire DeepMind himself. He lost.

In emails released during the OpenAI lawsuit, Musk wrote in 2016: “Deepmind is causing me extreme mental stress. If they win, it will be really bad news with their one mind to rule the world philosophy.” He warned that Hassabis “could create an AGI dictatorship.”

The energy argument

Musk’s public case for space-based AI compute is straightforward. “The limiting factor for AI deployment is fundamentally electrical power,” he said at Davos. “We’re very soon, maybe even later this year, producing more chips than we can turn on. Except for China, China’s growth in electricity is tremendous.”

The math, as Musk presents it: solar panels in orbit generate roughly five times more power than on Earth (no night cycle, no weather, no atmospheric attenuation), while the cold of space provides efficient cooling. “You have solar panels facing the sun and a radiator pointed away from the sun,” he explained. “It’s just a very efficient cooling system.”

At the December Diamandis interview, he projected “100 gigawatts a year of solar-powered AI satellites” within the decade, requiring roughly 10,000 Starship flights annually. “There’s a path to get probably to a terawatt per year,” he said. “And if you want to go to 100 terawatts a year, you make those AI satellites on the moon and use a mass driver.”

The vision is coherent. Whether it justifies merging a $1 billion-per-month money-losing AI company with a rocket manufacturer is a different question, one the IPO prospectus will need to answer.

The regulatory shadow

xAI’s Grok AI currently faces investigations across jurisdictions representing over 2 billion people.

California Attorney General Rob Bonta launched a formal investigation in January 2026 over Grok’s generation of non-consensual sexually explicit imagery and child sexual abuse material. The Internet Watch Foundation confirmed discovery of “criminal imagery of children” on dark web forums where users claimed to have created them using Grok. Thirty-five U.S. state attorneys general issued a joint letter demanding action. The European Commission opened proceedings under the Digital Services Act.

When pressed on the controversies, Musk defended the AI by comparing its capabilities to Photoshop.

Meanwhile, SpaceX holds approximately $22 billion in active government contracts, including classified work on the Starshield spy satellite constellation. The merger creates unprecedented questions about combining a major defense contractor with an AI company under active investigation, questions existing regulatory frameworks weren’t designed to address.

“At Least I’d Like to Be Alive to See It”

In December, Musk offered his most candid assessment of the AI future he’s racing toward.

At the Grok 4 launch in July 2025, Musk offered his most candid assessment of the AI future he’s racing toward.

“Will this be bad or good for humanity?” he asked, before predicting it would most likely be good. “But I somewhat reconciled myself to the fact that even if it wasn’t going to be good, I’d at least like to be alive to see it happen.”

This is the same person who warned OpenAI’s board about “AGI dictatorships.” Who demanded his children control AGI. Who wrote that Hassabis could create “one mind to rule the world.” Who signed a letter warning of “profound risks to society and humanity.”

In 2012, Demis Hassabis warned Musk that superintelligent AI could follow humans to Mars and destroy everything he’d built. Musk’s 2026 answer, encoded in a $1.25 trillion merger, is clear: he’ll take that bet. But only if it’s his AI making the trip.