WSJ What’s News - Behind SpaceX’s Surprise Deal to Buy xAI

Episode Date: February 3, 2026

A.M. Edition for Feb. 3. Elon Musk’s well-established rocket business and AI startup are joining forces to form a $1.25 trillion company. WSJ’s Berber Jin says the move was unexpected as industry observers had thought xAI would merge with Tesla instead. Plus, the Clinton's offer to give depositions, as the Epstein scandal sends shockwaves across the Atlantic. And Homeland Security secretary Kristi Noem says that officers in Minneapolis will receive body cameras "effective immediately". Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

A Tims Donut and Coffee is the original collab. And now, any classic donut is a dollar when you buy any size original or dark roast coffee. Get a deal on the iconic duo with a Tins dollar donut plus tax at participating restaurants for limited time. Terms apply. See app for Tims. 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.

of partial government shutdown. We have a one-vote margin now, so what could go wrong? That's fine. 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 one-and-a-quarter trillion-dollar company. The merger was confirmed. affirmed 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. 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. Berber added that he'll be looking to see how investors like this combination and whether they buy into Musk's long-term vision for the new company. 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 Sundar-Pichai and Sam Altman at OpenAI, have talked about space as a 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. 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 for Republicans if he hopes to pass the measure. Across the aisle, Democratic minority leaders,

Hakeem Jeffrey said that while some in his party made back in eventual spending package, they're united in opposing an earlier procedural vote. 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. One of those demands that federal officers wear body cams is being partially addressed by the administration. Homeland Security Secretary Christy Noam says that officers in Minneapolis will receive body cameras effective immediately, an effort that would expand to DHS law enforcement

nationally, quote, as funding becomes available. Speaking in the Oval Office, President Trump told reporters that the move was all Nooms. 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. 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 U.S. 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 U.S., 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. and former president Bill Clinton and former Secretary of State Hillary Clinton have offered to give depositions to a House committee investigating sex offender Jeffrey Epstein.

The two had been facing a contempt vote after earlier declining to appear for depositions. The Clintons have said they had no personal knowledge of Epstein's criminal activities, though Bill Clinton has acknowledged flying on Epstein's private jet. Lawyers for the two have argued the subpoenas against them are designed to, embarrass the Clintons, while Democrats say the chair of the House committee and Republicans are failing to investigate President Trump's connections with Epstein. Meanwhile, the fallout from the latest release of Epstein documents, which included photos of former Prince Andrew kneeling over an unidentified woman, is now reaching across the Atlantic, as journal correspondent Max Colchester explains. In the UK, the Epstein scandal has morphed from something which focused on potential bad

behavior by individuals, which was chronicled in the tabloids, into where, what could now morph into a police investigation. On Friday, documents were made public, which appear to show that a former senior member of the British government, Lord Peter Mandelson, was forwarding internal information from Downing Street to Epstein directly, which raises the question of whether Epstein was able to trade on that non-public information.

The British police has said they are looking at the emails in question and will determine whether to launch a fully-fledged investigation. And there's a key ramification from this, which is now British Prime Minister Kirstama is saying that Peter Mandelson and Andrew Mountbatten-Winzer should give evidence to the House Oversight Committee. And the Prime Minister has suggested that Lord Mandelston should quit Britain's House of Lords. So we're talking about real-world ramifications now from this scandal. Mandelson, who quit the ruling Labour Party this week, says he has no recollection or record of having received money from Epstein, as newly released emails appeared to show.

and he didn't immediately respond to an email requesting further comment. Andrew, who didn't reply to an email requesting comment, has denied allegations he abused an American teen introduced to him by Epstein. Coming up, will weigh the long-term impact of America's aggressive foreign policy strategy as U.S. allies search for alternative trading partners. That chat with the journal's David Luno after the break. The scorebed app here with trusted statement. Stats and real-time sports news.

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The score bet. Trusted sports content, seamless sports betting. Download today. 19 plus, Ontario only. If you have questions or concerns about your gambling or the gambling of someone close to you, please go to conicsonterio.ca. Can the world separate its views of President Trump from its treatment of Americans and American brands?

It's one of several questions that journal UK Bureau Chief David Luno has set out to answer, as the White House's America First strategy risks becoming an America alone approach to foreign relations. David, you write that America's allies are becoming increasingly disenchanted with the U.S. This is based not only on interviews that you conducted, but also on public opinion polling. Could you just walk us through what you're seeing in those surveys? Well, the surveys make for grim reading, here in Britain, which has pretty much always been America's strongest overseas ally, our partner in crime in many ways. The number of Brits who view the U.S. unfavorably has doubled in the last two years to 64%. In Germany, 71% now view the U.S. as an adversary. And across Europe, only 16% view the U.S. as an ally.

Those are by far the lowest numbers we've ever had. And yeah, it's not only Europe. I mean, nearly two-thirds of Canadians and Mexicans now hold unfavorable views of the U.S. And they view the U.S. as a bigger threat than China, which is also something very new. We're seeing that in Brazil and a lot of other third countries. Favorable views of the U.S. are also falling in Asia among our longest standing allies there, so places like Korea and Japan. There are only very few exceptions to this. So across much of the world, it's a pretty dark view of the U.S. right now. David, we're talking here about America's

brand reputation, but I'm curious about American brands. Are we seeing a potential business impact here, too? The U.S. has proved really resilient in the past to the occasional bouts of sort of boycotts of American products. I mean, after the Iraq War, we saw that as well. That's generally held up Well, the U.S. has enormous reservoirs of soft power. We have the best universities in the world. We make the movies and the music that everyone wants to listen to. People like American technology were the world's most innovative economy. So there's a lot of pluses. But right now, as the U.S. sort of disengages with globalization, other countries are over time. It's not just creating an app to allow Canadians to find Canadian-made products. It's that Canada's now making free trade

agreements with India, with Europeans, trading more with China. They're all going to diversify their trade a little bit away from the United States as a hedge. They're also going to be pursuing their own defense buildups independently, or at least more locally sourced than they would have in the past. So the Europeans are going to rearm. Are they going to buy F-35s? Maybe for now, but they're not always going to just buy American to rearm. So American defense sales will also probably suffer on the margin. So, you know, will it be as easy for American films to do as well abroad if the American image isn't so good? Will people want to use their Apple phones or Microsoft or AI that's made in America? Right now, they don't have much choice. But as a diversification slowly takes hold,

they will have increasing choices. And if they don't like the United States, they will make choices that don't align with our economic interests. David Luno is the Wall Street Journal's UK Bureau Chief. David, thank you so much. It's a pleasure. And that's it for what's news for this Tuesday morning. Today's show was produced by Hattie Moyer and Daniel Bach. Our supervising producer was Sandra Kilhoff, and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show.

Until then, thanks for listening.