Elon Musk believes the best way to solve the difficulties of building AI data centers on earth is to move them into outer space. His merger this week of his rocket company SpaceX with his artificial intelligence company xAI could help get them there.

Elon Musk is joining his space exploration and artificial intelligence ventures into a single company before what's expected to be a massive initial public offering for the business later this year.

The merger will “form the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s for...