xAI, now operating as SpaceXAI, is an American artificial intelligence company founded by Elon Musk in March 2023. It develops the Grok family of large language, text-to-image, and text-to-video models, and operates a data center business centered on its Colossus cluster. In February 2026, xAI was acquired by SpaceX, a spaceflight company also founded by Musk, and rebranded as SpaceXAI in July of that year.
The company emerged during the early stages of the AI boom, positioning itself as a competitor to organizations like OpenAI and Anthropic. Its primary product, Grok, has been integrated with the social network X, drawing both user adoption and controversy. xAI's trajectory has included rapid expansion, significant funding, and a series of strategic acquisitions, culminating in its absorption into SpaceX.
Founding and Early Development
Musk founded xAI on March 9, 2023, with a team of 11 researchers, including Kyle Kosic, led by chief engineer Igor Babuschkin, formerly associated with Google DeepMind. The founding team also included Jimmy Ba, Zihang Dai, Manuel Kroiss, Ross Nordeen, Toby Pohlen, Christian Szegedy, Yuhuai Wu, Greg Yang, and Guodong Zhang. Musk publicly announced the company on July 12, 2023. The company was initially incorporated in Nevada as a public-benefit corporation, but by May 2024 it had dropped that status. As of May 2026, xAI was headquartered in the San Francisco Bay Area.
The company released its first model, Grok 1, in November 2023. In January 2025, xAI opened a London office at 20 Air Street in Soho. By August 2024, Musk was diverting a large number of Nvidia chips originally ordered for Tesla to X and xAI. On December 23, 2024, xAI raised US$6 billion in a private funding round supported by Fidelity, BlackRock, and Sequoia Capital, bringing its total funding to over $12 billion.
Growth and Restructuring
On February 10, 2025, xAI and other investors made an offer to acquire OpenAI for $97.4 billion. On March 17, 2025, xAI acquired Hotshot, a startup focused on AI-powered video generation tools. On March 28, 2025, Musk announced that xAI acquired its sister company X Corp., which owns the social network X. The all-stock deal valued X at $33 billion, with a full valuation of $45 billion including $12 billion in debt, while xAI was valued at $80 billion. Both companies were combined into a single entity called X.AI Holdings Corp.
In July 2025, the United States Department of Defense announced that xAI had received a $200 million contract for AI in the military. On September 12, 2025, xAI laid off 500 data annotation workers, a division that had been its largest and had worked to train Grok. In October 2025, xAI moved into offices at 1450 Page Mill Road in Stanford Research Park, Palo Alto, across from Tesla's Global Engineering Headquarters. On December 30, 2025, xAI purchased a third building to increase its training capacity to nearly 2 gigawatts of compute power, and announced plans to expand its Colossus supercomputer to at least 1 million graphics processing units.
Acquisition by SpaceX and Rebranding
On February 2, 2026, SpaceX acquired xAI in an all-stock transaction, structuring xAI as a wholly owned subsidiary. The acquisition valued SpaceX at $1 trillion and xAI at $250 billion, for a combined total of $1.25 trillion. Following the acquisition, xAI laid off some employees and was restructured into four primary development teams. Around this time, half of the company's co-founders left. In early March 2026, two more co-founders, Guodong Zhang and Zihang Dai, departed, coinciding with an audit performed by SpaceX and Tesla, leaving only Musk and Ross Nordeen, who left later that month.
On April 10, 2026, xAI restructured its staff: Chief Financial Officer Anthony Armstrong departed, and Michael Nicolls, vice president of SpaceX's Starlink, became xAI's president. On April 21, 2026, xAI announced a deal with software company Anysphere, giving SpaceX the right to acquire the company for $60 billion later in 2026, or to pay $10 billion for their joint work. In May 2026, Musk announced that xAI would cease to exist as a separate company, with Grok and X becoming the AI division of SpaceX. In July 2026, xAI was rebranded as SpaceXAI. On June 16, 2026, SpaceX exercised its option and announced an all-stock acquisition of Anysphere (Cursor) for $60 billion, with closing expected in the third quarter of 2026. The transaction closed on August 14, 2026, making Cursor a wholly owned subsidiary of SpaceX and part of the SpaceXAI team.
Colossus and Environmental Concerns
In June 2024, the Greater Memphis Chamber announced that xAI was planning to build Colossus, the world's largest supercomputer, in Memphis, Tennessee. After a 122-day construction, the supercomputer became fully operational in December 2024. Local government expressed concerns about increased electricity usage, with 150 megawatts of power at peak. While an agreement with the city was being worked out, xAI deployed 14 VoltaGrid portable methane-gas powered generators. Environmental advocates said the gas-burning turbines emitted large quantities of air pollution and operated illegally without necessary permits. The New Yorker reported on May 6, 2025, that thermal-imaging equipment showed at least 33 generators running, generating about the same power as a large gas-fired plant nearby. In June 2025, the NAACP threatened to file a lawsuit. From 2020 through 2024, the Memphis metro area violated national smog standards, and in 2025 the American Lung Association gave Shelby County an "F" for smog. Residents of Southeast Memphis, predominantly African-American, were reported to face a cancer risk four times the national average in 2013, potentially due to pre-existing air pollution. In July 2025, the Shelby County Health Department granted xAI an air permit for the project.
Products and Controversies
SpaceXAI's primary product is the Grok family of models, which includes large language, text-to-image, and text-to-video models. The company operates a data center business centered on its Colossus cluster, with Anthropic and Google as major customers. In the legal case Musk v. Altman, Musk stated that Grok was partly developed via distillation from OpenAI models. In August 2026, OpenAI announced it would stop providing its models to Cursor, citing distillation concerns. Integrated with X, Grok has drawn controversies, including for espousing Nazism and generating sexual deepfakes.