Behind SpaceX’s Surprise Deal to Buy xAI

Jessica Mendoza (0:00)

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Luke Vargas (0:22)

Elon Musk reshapes his tech empire as SpaceX acquires XAI. Plus, the Epstein scandal sends shockwaves across the Atlantic. And the House prepares to vote as soon as today to end partial government shutdown.

Max Colchester (0:36)

We have a one vote margin now, so what could go wrong?

SPEAKER_4 (0:38)

That's fine.

Luke Vargas (0:39)

It's Tuesday, February 3rd. I'm Luke Vargas for The Wall Street Journal. And here is the AM Edition of What's News, the top headlines and business stories moving your world today. We begin with a major tie up as SpaceX is buying XAI, a deal that brings together Elon Musk's well-established rocket business and his AI startup to form a $1.25 trillion company. The merger was confirmed in a memo yesterday by Musk, saying the deal will, quote, form the most ambitious vertically integrated innovation engine on and off Earth. But as journal tech reporter Berber Jin explains, the move was unexpected, as industry observers had anticipated that XAI would merge with Tesla instead.

Berber Jin (1:22)

We've reported that SpaceX is looking to go public as soon as the middle of this year. And this merger definitely throws a little bit of a curveball in those ambitions, because SpaceX on its own is a profitable business. And XAI, on the other hand, doesn't generate a lot of revenue, but it burns through billions of dollars every year on computing costs. So by merging the two companies together, he's essentially taking a very money-losing, cash-intensive business and pairing it with SpaceX.

Luke Vargas (1:50)

Berber added that he'll be looking to see how investors like this combination and whether they buy in to Musk's long-term vision for the new company.

Berber Jin (1:57)

In a blog post, Elon essentially said that the merger is in service of this kind of almost sci-fi-esque vision of building AI data centers in space. So Elon talked about having SpaceX building a constellation of data centers in space that can power AI training in the future. And a lot of tech CEOs, including Google's Sundar Pichai and Sam Altman at OpenAI, have talked about space as the new frontier and be able to harness the power of the sun and have more leeway to build data centers in places where there are fewer regulations.

Luke Vargas (2:31)

SpaceX previously invested $2 billion into XAI. And last week, Tesla committed to invest the same amount in the company. Republican House Speaker Mike Johnson says he has the votes to end a partial government shutdown as soon as today. That follows a push by President Trump to pressure a handful of House Republicans to drop their opposition to the bill unless it included voter ID legislation. Johnson has a thin majority in the House and will need near unanimous support from Republicans if he hopes to pass the measure. Across the aisle, Democratic minority leader Hakeem Jeffrey said that while some in his party may back an eventual spending package, they're united in opposing an earlier procedural vote.

SPEAKER_4 (3:14)

Democrats are committed to this fight. And again, we've made clear, line in the sand, red line. We've articulated the things that will be necessary for there to be a full year appropriations bill connected to ICE funding.

Luke Vargas (3:31)

One of those demands that federal officers wear body cams is being partially addressed by the administration. Homeland Security Secretary Kristi Noem says that officers in many cities in Minneapolis will receive body cameras effective immediately, an effort that would expand to DHS law enforcement nationally, as funding becomes available. Speaking in the Oval Office, President Trump told reporters that the move was all Noem's.

Donald Trump (3:56)

Well, it wasn't my decision, I would have, you know, I leave it to her. They generally tend to be good for law enforcement because people can't lie about what's happening. So it's generally speaking, I think 80% good for law enforcement.

Luke Vargas (4:09)

As a part of shutdown talks, Democrats also want to bar federal agents from wearing masks and mandate that they carry proper identification. Some 350,000 Haitian immigrants to the US will no longer lose their work permits or become targets for deportation today after a federal judge blocked the Trump administration from revoking their temporary protected status. DHS had moved to end the protections last year, arguing it was in the national interest. However, the judge said that the government offered no evidence Haitians under the designation posed a threat to the US and that the decision was, quote, motivated, at least in part, by racial animus. The administration has sought to end protected status designations for a range of countries, including Honduras, Somalia, and Venezuela, with a number of those efforts tied up in the courts.