Elon Musk, chief executive officer of Tesla Inc., during the US-Saudi Investment Forum at the Kennedy Center in Washington, DC, US, on Wednesday, Nov. 19, 2025.

Bloomberg | Bloomberg | Getty Images

Elon Musk said a primary reason for merging SpaceX with his artificial intelligence startup, xAI, is to more effectively build “orbital data centers.” That’s for a far-off future.

For now, xAI has a much more pressing need: cash.

In Monday’s blog post announcing the combination of his two companies, Musk estimated that “within 2 to 3 years, the lowest cost way to generate AI compute will be in space.” But xAI requires immense amounts of money to finance its massive infrastructure buildout as the three-year-old company tries to catch up to Google, OpenAI and Anthropic in the booming generative AI market.

SpaceX, which is reportedly aiming to go public this year in what could be a record-setting IPO, may represent Musk’s clearest path to landing that capital. The company is looking to raise up to $50 billion at a valuation as high as $1.5 trillion, according to Reuters.

A major key to SpaceX’s growth is Starlink, its satellite internet service, which has around 9,000 satellites in orbit today and roughly 9 million customers. It recently received authorization from the Federal Communications Commission to put another 7,500 satellites into orbit.

Tim Farrar, president of satellite and telecom industry research firm TMF Associates, said SpaceX can’t put that kind of money to work towards its existing business because there are only so many rocket launches available to get its Starlink satellites up into space each year.

Folding xAI into SpaceX, Farrar said, allows Musk to capitalize on investors’ insatiable appetite for AI holdings, while also securing the AI company’s financial position despite its mounting losses. According to a report from The Information late Monday, xAI has told investors that it burned about $9.5 billion through the first nine months of 2025.

“People are throwing tens of billions of dollars at AI companies right now, and in six months or 12 months time, they might have changed their mind about it,” Farrar said. “Getting the money is feasible” now but may not be forever.

In early January, xAI closed a $20 billion funding round at about a $230 billion valuation. OpenAI was valued at $500 billion in October, and is reportedly looking to bump that up to about $750 billion in its next round. Anthropic signed a term sheet this month for a funding that values the company at $350 billion.

In addition to a friendly capital market, Musk has the benefit of an extremely favorable regulatory landscape, as the Trump administration rolls back environmental, antitrust and other regulations.

Nowhere in Monday’s blog post was there mention of any need for regulatory approval, and Musk suggested in the first sentence of the statement that the transaction is done. Public records with the state of Nevada obtained by CNBC indicate that the deal was completed on Feb. 2, with Space Exploration Technologies Corp. listed as the “managing member” of X.AI Holdings.

Of particular importance to Musk is the recent installation of his business associate and former SpaceX investor and customer Jared Isaacman as the head of NASA. Isaacman has supported speeding up initiatives that would expand the agency’s contracts with SpaceX. And at the FCC, Chairman Brendan Carr has been a vocal proponent of SpaceX’s Starlink.

Commander Jared Isaacman of Polaris Dawn, a private human spaceflight mission, speaks at a press conference at the Kennedy Space Center in Cape Canaveral, Florida, U.S. August 19, 2024. 

Joe Skipper | Reuters

The landscape for tech mergers has also changed dramatically, with President Donald Trump in the White House and Republicans controlling both houses of Congress. The Federal Trade Commission is now run by Trump appointee Andrew Ferguson rather than Lina Khan, who was known for blocking big tech deals during Joe Biden’s presidency.

When it comes to AI, Musk’s longtime friend David Sacks is the White House crypto and AI czar, and has pushed the federal government to limit the amount of oversight AI labs face as they pursue aggressive growth strategies. In December, President Trump signed an executive order issuing a single regulation framework for AI, undermining the power of individual states — namely blue states like California and New York — to implement their own rules.

“To win, United States AI companies must be free to innovate without cumbersome regulation,” the order said. “But excessive State regulation thwarts this imperative.”

While Musk still has three years left of a second Trump administration, he may have only a small window of unified Republican control, with the mid-term elections taking place in nine months and the president’s favorability numbers sinking.

Related party transactions

Musk is moving fast. And he likely has the backing of a loyal band of investors who have a long history of supporting his intermingling of resources and merging of companies.

In 2016, Tesla acquired SolarCity for $2.6 billion, rescuing it from a looming liquidity crunch. Before the merger, Musk was a key investor in the solar business and served as chairman of the company, which he started with his cousins.

During his leveraged buyout of Twitter (which later became X) in 2022, Musk sold billions of dollars worth of his Tesla shares to finance the deal. He also tapped dozens of employees, even some executives, from SpaceX, Tesla and tunneling venture The Boring Co., to help him with the takeover and to make sweeping changes to the platform.

At Tesla, Musk has engaged in a number of related party transactions with SpaceX and, more recently, xAI. For example, Tesla has sold car parts and solar equipment to SpaceX, and the automaker relied on SpaceX to develop a special alloy for its Cybertruck.

In 2025, Tesla sold $430 million worth of its giant backup batteries called Megapacks to xAI, according to a filing out last week, accounting for about 3.4% of Tesla’s energy business revenue for the year. The batteries help power xAI’s data infrastructure that it’s building out around Memphis, Tennessee.

Shortly before that filing landed, Tesla said it was investing $2 billion into xAI as part of the company’s latest financing round. In July 2025, SpaceX reportedly invested $2 billion into xAI as well.

Farrar said that Musk’s biggest fans and institutional investors are willing to support the tangled web of transactions, or the “Muskonomy,” in part because they understand the symbolic importance of keeping his entire portfolio strong.

“The whole thing relies on confidence in him,” Farrar said. “If any piece of his empire was to fall by the wayside or go bankrupt, then it would undermine everything.”

WATCH: SpaceX could be the first $500 billion IPO, says Lerer Hippeau’s Eric Hippeau

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A crane towers above the mobile launcher 2 adjacent the Vehicle Assembly Building at Kennedy Space Center on Tuesday, July 22, 2025.

Richard Tribou | Tribune News Service | Getty Images

The director of NASA’s Marshall Space Flight Center, Joseph Pelfrey, announced his resignation from the role on Thursday, CNBC confirmed.

Pelfrey said in an email to employees at the space agency that as NASA focuses on its mission to return humans to the moon, it will be “important for agency leadership to move forward with a team they choose to execute the tasks at hand.”

The email also said Pelfrey would work with NASA leaders to “pursue new ways” to “serve our space program and our great nation.” Pelfrey wasn’t immediately available to comment.

NASA confirmed Pelfrey’s resignation and said in an email to CNBC that the agency is proceeding “with a public, open competition to find the next permanent director at one of the agency’s most important centers for human spaceflight.”

At Marshall Space Flight Center, in Huntsville, Alabama, Pelfrey oversaw “7,000 onsite and near-site civil service and contractor employees,” and “an annual budget of approximately $5 billion,” according to a NASA web page describing his responsibilities. The space center now employs over 6,000 people, according to the center’s official government website.

Pelfrey had planned an all-hands conference with Marshall employees this week that was canceled, said agency staffers, who asked not to be named to discuss sensitive matters. They said Pelfrey’s resignation came as a surprise.

The White House’s 2026 budget request, which has not yet been enacted into law, includes funding for the space agency. However, NASA’s resources have declined amid Trump administration budget cuts.

About 4,000 NASA employees left through a deferred resignation program offered by the agency, and others were let go through cuts initiated by the Department of Government Efficiency (DOGE), an effort that was led by Elon Musk during his days with the Trump administration.

The administration also defunded and compelled the closure of the NASA Goddard Institute for Space Studies, which was housed in a building owned by Columbia University in New York.

WATCH: Why the U.S. and SpaceX need each other

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SpaceX is valued at around $400 billion and is critical for U.S. space access, but it wasn’t always the powerhouse that it is today.

Elon Musk founded SpaceX in 2002. Using money that he made from the sale of PayPal, Musk and his new company developed their first rocket, the Falcon 1, to challenge existing launch providers.

“There were actually a lot of startup aerospace companies looking to take on this market. They recognized we had a monopoly provider called United Launch Alliance. They had merged the Boeing and Lockheed rocket launch capacity to one company, and they were charging the government hundreds of millions of dollars to launch satellites,” said Lori Garver, a former deputy administrator at NASA.

In 2003, Musk paraded Falcon 1 around the streets of Washington hoping to attract the attention of government agencies and the multi-million dollar contracts that they offered. It worked, and in 2004, SpaceX secured a few million dollars from the Defense Advanced Research Projects Agency, or DARPA, and the U.S. Air Force to further develop its rockets.

Despite the government support, the company struggled. Its first three launches of the Falcon 1 failed to reach orbit.

“NASA, and specifically the the initial commercial cargo contract, is what saved the company when it was on the brink of bankruptcy,” said Chris Quilty, president and Co-CEO of Quilty Space, a space-focused research firm.

NASA awarded the $1.6 billion contract, known as Commercial Resupply Services to SpaceX in 2008, just months after the first successful flight of the Falcon 1. The contract called on SpaceX to use its new rocket, the Falcon 9, along with its Dragon capsule to ferry cargo and supplies to the International Space Station over the course of 12 missions. In 2014, SpaceX won another NASA contract worth $2.6 billion to develop and operate vehicles to ferry astronauts to and from the International Space Station.

Today, SpaceX dominates large parts of the space market from launch to satellites. In 2024, SpaceX conducted a record-breaking 134 orbital launches, more than double the amount of launches done by the next most prolific launch provider, the China Aerospace Science and Technology Corporation, according to science and technology consulting firm BryceTech. These 134 launches accounted for 83% of all spacecraft launched last year. According to a July report by Bloomberg, SpaceX was valued at $400 billion.

SpaceX’s Dragon capsule and Falcon 9 rocket are the primary means by which NASA launches astronauts and supplies to the International Space Station. The company’s Starlink satellites have become indispensable for providing internet access to remote areas as well as to U.S. allies during wartime. The company’s Starship rocket, though still in testing, is also key to the U.S. plan to return to the moon. SpaceX is also building a network of spy satellites for the U.S. government called Starshield as part of a $1.8 billion contract. Even competitors including Amazon and OneWeb have launched their satellites on SpaceX rockets. 

“The ecosystem of space is changed by, really it’s SpaceX,” Garver said. “The lower cost of access to space is doing what we had dreamed of. It is built up a whole community of companies around the world that now have access to space.”

Watch the video to find out more.

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Pavlo Gonchar | Lightrocket | Getty Images

Space startup Varda announced on Thursday that it has raised $187 million in Series C funding, led by venture capital firms Natural Capital and Shrug Capital, to continue advancing drug manufacturing in space.

The latest round included participation from Peter Thiel, Lux Capital, Khosla Ventures and Caffeinated Capital. It brought the total capital Varda’s raised to $329 million.

“By expanding, we can support work on more complex molecules and ultimately increase cadence to achieve the turnaround times the pharmaceutical industry expects,” Chief Science Officer Adrian Radocea said in a press release Thursday.

Follow and listen to CNBC’s “Manifest Space” podcast, hosted by Morgan Brennan, wherever you get your podcasts.

Varda’s main mission is to launch and return drugs made in space. The startup has said the medicines crystallize differently in orbit due to the gravity differences, which would allow it to complete drugs that are currently difficult to manufacture.

“And so what this series C allows us to do is two big things. First is increase cadence, meaning more flights more often, so the rate of flying,” Varda CEO Will Bruey told CNBC’s Morgan Brennan for the “Manifest Space” podcast. “And also allows us to build out our biologics lab, which is our way of determining which drug molecules make sense to send a microgravity through a bunch of testing on the ground and then preparing that formulation for flight.”

In 2024, the space startup’s W-Series 1 capsule received FAA approval to return after successfully creating the drug Ritonavir the previous year.

So far, Varda said the company has been able to complete three space launches. Now, a fourth is in orbit, and the company expects to launch a fifth by the end of the year. Varda makes all of its parts in house.

“With this capital, Varda will continue to increase our flight cadence and build out the pharmaceutical lab that will deliver the world’s first microgravity-enabled drug formulation,” Bruey said.

Varda Space Industries is the first company to process materials outside the International Space Station.

Recently, the space company has also operated a testbed for the U.S. government to use the W-series reentry vehicles to advance technology.

Varda said it has expanded into Huntsville, Alabama, and opened a laboratory in El Segundo, California, to begin work to crystallize more drugs.

“Our new lab space is an investment in our belief that in-space pharmaceutical manufacturing will drive the foundation of the orbital economy,” Radocea said.

Correction: Varda makes all of its parts in house and is based out of Hunstville, Alabama. A previous version of this story misstated the system.

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