Elon Musk’s SpaceX acquired xAI in a record-setting transaction aimed at expanding AI computing capacity, including potential space-based data centers powered by solar energy.

SpaceX acquired xAI to create a company valued at $1.25 trillion, SpaceX announced. Al Root, an associate editor at Barron's, joins with more.

The IPO is expected to generate tens of billions of dollars, giving xAI a new source of funds. Musk also says the arrangement is meant to pave the way for space-based data centers, days after SpaceX filed a plan to operate up to one million satellites for the project.

The deal will create the world's most valuable private company.

SpaceX combination, which could further Elon Musk’s dream of corporate “convergence,” but potentially at a cost to Tesla shareholders

SpaceX and xAI did not immediately respond to a request for comment from Business Insider. XAI plans to hold an all-hands in the coming days and host trainings related to the merger, the internal memo said.

SpaceX has acquired xAI to form the most ambitious, vertically-integrated innovation engine on (and off) Earth,” Musk, the top executive at both companies, said in the memo. The combination brings together a mature and dominant company in SpaceX,

Musk, the top executive of both companies, said the deal would "form the most ambitious, vertically-integrated innovation engine on (and off) Earth."