Senator Elizabeth Warren and Andy Kim recently sent a letter to Defense Secretary Pete Hegseth in which they raised concerns about undisclosed investments in SpaceX by Chinese interests and how that could pose a national security threat.
The letter comes days after Musk revealed he was merging two of his companies, SpaceX and xAI, in a deal reportedly worth $1.25 trillion.
Why do Warren and Kim want to investigate SpaceX?
The two Democratic U.S. senators have urged the Pentagon to conduct an immediate review of SpaceX amid the allegations, which come complete with media reports and court testimony suggesting that investors linked to China routed funds through entities in the Cayman Islands and British Virgin Islands to mask purchases of SpaceX shares.
According to the senators, any Chinese ownership could trigger U.S. rules governing foreign ownership, control or influence, known as FOCI, given the potential exposure of sensitive information or technologies.
In their letter, the senators asked the Department of Defense to disclose the extent of any Chinese ownership, assess whether SpaceX is subject to FOCI mitigation requirements, and also determine whether foreign investments should be reviewed by the Committee on Foreign Investment in the United States.
The senators have demanded a response by February 20. They argue that SpaceX’s recent acquisition of xAI further adds to the immediacy of questions about Chinese investment in the company.
Senators target Musk after merger
At the beginning of the week, Elon Musk revealed he was merging two of his companies SpaceX and xAI, in a deal reportedly worth $1.25 trillion.
The reason behind this merger is that Musk is convinced that in order for AI to grow, it needs to go to space. This is because at present, AI is dependent on “large terrestrial data centers” that run on “immense amounts of power and cooling.”
This comes at great cost to the environment and has seen community opposition from residents who have had to endure the constant humming of the data centers and their other, less popular side effects.
Musk believes installing data centers in space is the solution. “In the long term, space-based AI is obviously the only way to scale,” Musk said.
Of course, he is not the only one who has thought of putting data centers into orbit. Google has tasked Project Suncatcher with building solar-powered AI data centers in space, while China and Europe are looking into space-based data centers.
Some think that he is doing this as a way to bail out xAI, which has been relatively unprofitable unlike SpaceX. In fact, not only is xAI not profitable, it’s losing serious cash as it races to keep up with rivals like Google and OpenAI.
How investors feel about the merger is unclear at this time. However, it is crucial to note that it is not Musk’s first rodeo. He did the same thing in the past when he merged the debt-ridden SolarCity with Tesla in 2016. That plan faced resistance from shareholders who sued to block the merger, alleging it was a $2.6 billion “bailout” of a cash-strapped, struggling company.
However, Musk eventually won the lawsuit, with a judge ruling that he did not force Tesla to overpay for SolarCity.
