Potential Merger Between SpaceX and xAI
Elon Musk’s SpaceX and xAI are reportedly discussing a merger as they prepare for a significant initial public offering (IPO) expected later this year.
This merger might consolidate Musk’s ventures, combining his rocket company, Starlink satellites, the X social media platform, and the Grok AI chatbot, based on insights from industry sources and recent filings obtained by Reuters.
According to the report from Reuters, this strategic move could energize SpaceX’s plans for launching data centers into orbit, especially as Musk competes against major tech players like Google, Meta, and OpenAI in the burgeoning AI sector.
As the richest individual globally, Musk serves as CEO of both SpaceX and xAI, which also oversees his social media venture, X. Additionally, he runs other companies, including Tesla, The Boring Company, and Neuralink.
Neither Musk, SpaceX, nor xAI have commented on these developments.
If the merger moves forward, xAI stock would be swapped for SpaceX stock. To enable this transition, two entities have been created in Nevada, as reported by sources familiar with the situation.
However, it remains unclear what the valuation of this deal might be, along with the main reasons behind it or the anticipated timeline.
The Nevada corporate filings indicate that one entity is a limited liability company with SpaceX and its CFO, Brett Johnsen, involved, while the other lists Johnsen as the sole officer. Unfortunately, the filings do not provide additional insights regarding the cooperation’s goals.
Johnsen has not responded to inquiries seeking clarification.
One anonymous source highlighted that certain xAI executives might have the chance to opt for cash instead of SpaceX stock in this deal. Still, it’s worth noting that no final agreement has been reached, and details about the timing and arrangement remain uncertain.
Currently, SpaceX holds the title of the world’s most valuable private company, with recent stock transactions pushing its valuation to around $800 billion. Meanwhile, xAI was valued at approximately $230 billion as of November. Reports indicate that SpaceX aims to initiate its IPO this year, potentially surpassing a $1 trillion valuation.
Space Data Center Development
Through xAI, Musk is in the process of constructing a massive AI training supercomputer named Colossus in Memphis, Tennessee. Last year, SpaceX committed $2 billion to xAI as part of a larger $5 billion equity financing round.
During a speech in Davos, Switzerland, Musk expressed that “the lowest cost place to deploy AI will be in space,” predicting that this would become a reality within two to three years.
The initiative to utilize space for AI processing, powered by solar energy, aims to lower computing costs associated with training models like xAI’s Grok. In a competitive landscape, Jeff Bezos’ Blue Origin recently announced an extensive network of satellites, while Google is investigating space-based data centers through its Project Suncatcher.
However, the concept of building data centers in space poses significant risks, particularly given the rapidly changing landscape of AI investments. Some industry experts are skeptical about whether the expected energy savings can justify the additional expenses involved in adapting these systems for a space environment.
Caleb Henry from Quilty Analytics mentioned that integrating xAI with SpaceX could enhance the company’s position for acquiring a significant defense contract with the Department of Defense, which is keen on expanding AI applications in military frameworks.
Recently, Defense Secretary Pete Hegseth visited SpaceX’s facility in Texas, noting that xAI’s language models and the Grok platform will be incorporated into military networks as part of the Pentagon’s strategy to accelerate AI use.
xAI holds a contract worth $200 million to supply Grok products to the Department of Defense.
Starlink, along with its security variant Starshield, currently leverages AI significantly, particularly for automated satellite navigation. Under agreements with U.S. intelligence agencies, StarShield is in the process of establishing a network of classified satellites equipped with various sensors, expected to utilize AI for tracking movements on Earth.
Musk’s Previous Mergers
This potential deal isn’t Musk’s first attempt at merging businesses under his control. Back in 2025, he restructured the social media platform X into xAI, allowing the AI startup to access X’s data and distribution networks. Prior to that, he utilized Tesla stock to acquire the solar energy company SolarCity in 2016.
Earlier this month, xAI successfully raised $20 billion in a Series E funding round, exceeding its goal of $15 billion at a valuation of $230 billion. Tesla also announced that it would invest about $2 billion in xAI.
Founded in 2002, SpaceX has reshaped the global space sector with its reusable Falcon rocket, which is crucial for the rapid deployment of Starlink—a network of thousands of satellites currently operational in space.
SpaceX is also in the process of arranging banks for an IPO potentially occurring within this year.
