FILE PHOTO: SpaceX's logo and an Elon Musk photo are seen in this illustration created on December 19, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
Feb 3 (Reuters) - U.S. space stocks rose on Tuesday after Elon Musk announced the merger of SpaceX and xAI in a deal that valued the combined entity at $1.25 trillion, a major push to expand artificial intelligence infrastructure outside earth.
Musk said the most cost-effective way to generate AI compute will be in space within two to three years as Big Tech companies pursue artificial general intelligence, a theoretical milestone where machines could surpass human thinking.
Shares of Rocket Lab and Planet Labs rose around 3% in premarket trading, while AST SpaceMobile and Globalstar added 2.4% and 1.3%, respectively.
Intuitive Machines gained 2.1% and and Redwire 4.9%.
Musk said on Monday the merger aims to create a vertically integrated and ambitious innovation powerhouse, combining AI, rocket technology, space-based internet services, direct-to-mobile communications and a platform for real-time information and free speech.
"Others may buy into Musk's grand vision of data centres in the cosmos, and this may only whet the appetite ahead of what could be the largest IPO of all time," AJ Bell investment director Russ Mould said.
The deal that brings together two of the largest privately held companies in the world comes as SpaceX plans a blockbuster public offering this year that could value it at more than $1.5 trillion, two people familiar with the matter have said.
XAI was last valued at $230 billion in November, according to the Wall Street Journal.
Global investment in space technology is poised to climb further this year, propelled by government spending on defense-linked satellite systems and private sector bets on launch capacity, investment firm Seraphim Space said last month.
"This is the strongest validation yet that space will be the backbone of the next wave of AI," said Seraphim Space CEO Mark Boggett.
SpaceX has recently requested permission to launch a constellation of 1 million satellites that will orbit Earth and harness the sun to power AI data centers, underscoring a growing need of tech giants as data centers on earth have driven up demand for electricity and water to cool their servers.
(Reporting by Jaspreet Singh in Bengaluru; additional reporting by Akash Sriram in Bengaluru; Editing by Arun Koyyur)
