The AI Race Moves to Space (And Why You Shouldn't Follow)
Musk merges SpaceX + xAI for space-based AI. Nvidia bets $20B on OpenAI. The pattern is clear: go vertical at scale or niche deep. Pick your play for 2026.
Week of February 2-6, 2026
🔥 Lead Story
SpaceX Merges with xAI in $1.25 Trillion Deal
Elon Musk just combined two of his companies—SpaceX and xAI (which owns X)—into what he's calling:
"the most ambitious, vertically-integrated innovation engine on (and off) Earth."
The stated vision: space-based AI data centers powered by solar energy orbiting Earth. SpaceX filed with the FCC to launch up to 1 million data center satellites, claiming that within 2-3 years, space-based AI compute will be cheaper than ground-based alternatives.
Business impact: This isn't just sci-fi theater. The combined company, valued at $1.25T, plans to IPO this year. SpaceX made $8B profit last year. If this works, cloud providers will face a literal race to space—and the cost structure of AI infrastructure could flip overnight. Watch for AWS, Google Cloud, and Microsoft to respond.
đź“° This Week's Top Stories
1. Nvidia Eyes $20B OpenAI Investment
Reports indicate Nvidia is preparing a massive $20 billion investment in OpenAI's upcoming funding round, positioning the chipmaker deeper into the AI stack beyond just hardware.
Why it matters: Nvidia isn't content selling picks and shovels—it wants equity in the gold rush. This vertical integration play could create conflicts with other AI companies relying on Nvidia chips. Expect tension as hardware vendors become competitors.
2. Overland AI Raises $100M for Defense Autonomy
Seattle-based Overland AI closed a $100 million round to scale autonomous ground systems for defense and national security applications. The company focuses on uncrewed ground vehicles for military use.
Why it matters: While consumer autonomous vehicles hit roadblocks, defense applications are accelerating. Government contracts = predictable revenue. SMBs building autonomy tech should consider pivoting to B2G sales.
3. Washington Post Slashes 300+ Jobs
Jeff Bezos's newspaper eliminated over 300 positions, gutting its sports desk, international reporters, tech coverage (including its Amazon beat), and more. Former EIC Marty Baron called it "one of the darkest days" in the paper's history.
Why it matters: Legacy media's AI transition continues to be brutal. If one of the world's wealthiest owners can't sustain journalism at scale, the industry's future looks increasingly algorithmic. Content businesses: diversify revenue now.
4. OpenAI Explores $100B Funding Round
OpenAI is in talks to raise as much as $100 billion in what would be one of the largest funding rounds in tech history. The valuation and terms remain fluid.
Why it matters: The AI infrastructure war is entering absurd territory. $100B rounds signal that investors believe AGI economics justify unprecedented valuations. If you're building AI products, prepare for even more well-funded competition.
5. Kalshi Under Fire for User Losses
A Citizens Equity analyst report found that prediction market users on platforms like Kalshi lost money faster (proportionally) than users of established gambling sites like FanDuel and DraftKings during their first three months. Kalshi reportedly pressured the data provider to recant findings.
Why it matters: Prediction markets are gambling with a fintech wrapper. Regulators are watching. If you're building in this space, prepare for the same scrutiny as casinos, not the friendly treatment SaaS gets.
6. January 2026: $30B+ Startup Funding Surge
January marked a massive surge in global startup funding, with over $30 billion flowing into AI infrastructure, compute, robotics, and data platforms.
Why it matters: The funding winter is over, for AI companies. If you're not in AI/infrastructure, capital remains tight. The two-tier market (AI vs. everything else) is widening.
7. Canon Releases Limited Edition G7 X Mark III
Canon launched a special graphite edition of the PowerShot G7 X Mark II, the camera that became a viral sensation among content creators and vloggers. Functionally identical to the original but with updated aesthetics.
Why it matters: Creator economy hardware is now mainstream enough for anniversary editions. If you're building creator tools, the market is maturing fast, and rather than betting on a singleincumbents are defending turf.
8. DeepSeek Challenges OpenAI with Cost-Efficient Models
Chinese AI company DeepSeek continues gaining traction as a cost-efficient alternative to OpenAI, with partnerships emerging (including with BYD). The company's R1 model competes directly with OpenAI's o1 on reasoning tasks.
Why it matters: The AI oligopoly narrative is cracking. Chinese models are competitive and cheaper. Global fragmentation is accelerating; plan for multi-provider strategies rather than betting on a single vendor.
🛠️ Tool of the Week
Apple Sports Adds Golf Coverage
Apple's free Sports app now tracks PGA Tour and LPGA Tour events with live leaderboards, scorecards, and hole-by-hole results. Launched with the WM Phoenix Open this weekend.
Simple, clean, free. If you're building sports tech or betting apps, watch how Apple quietly dominates verticals by giving away what others charge for.
đź’ˇ Quick Takes
- YouTube pledging to "reduce the spread of low quality AI content" — good luck with that
- Hulu enters podcasting — streaming content to exclusive podcast distribution. The walled gardens expand
- Ford eyes Geely partnership — Chinese automaker best positioned for US market could team with Ford on tech/manufacturing in Europe
- Egypt bans Roblox — latest country to block the gaming platform over "moral and educational values" concerns
- Grand Tour pivots to YouTube creators — Francis Bourgeois (viral trainspotter) and Throttle House hosts replace traditional celebrities
đź“Š Numbers That Matter
| NUMBER | WHAT |
|---|---|
| $1.25T | SpaceX/xAI combined valuation |
| $20B | Nvidia's potential OpenAI investment |
| $100B | OpenAI's target funding round |
| $30B+ | Global startup funding in January 2026 |
| $100M | Overland AI defense tech raise |
| 1M | Data center satellites SpaceX wants to launch |
| 300+ | Washington Post jobs eliminated |
| $8B | SpaceX profit in 2025 |
🎯 Brian's Take
This week's SpaceX/xAI merger perfectly captures where we're headed: consolidation at the top, fragmentation everywhere else.
Musk is betting that AI infrastructure must move to space to scale. Whether or not space-based data centers pencil out in 2-3 years, the filing to launch 1 million satellites signals something important: the largest players are thinking in entirely different timeframes and scales than the rest of us.
Meanwhile, we're seeing:
- Nvidia going from chipmaker → AI investor
- Prediction markets facing gambling regulation
- Legacy media is collapsing faster
- Chinese AI models closing the gap
- Defense tech absorbing serious capital
The pattern? Vertical integration at a massive scale, or niche dominance in specific verticals. The middle is disappearing.
For SMBs and solo founders: pick a vertical, go deep, and don't try to compete on infrastructure. Let the trillion-dollar companies fight over space compute. You win by solving a $10M problem really well, not a $10B problem poorly.
That's the play in 2026.
Thanks for reading The Weekly Byte. Hit reply if you spotted something I missed.
— Brian
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