SpaceX to Acquire xAI as Musk Builds Integrated AI–Space Platform Ahead of IPO

Elon Musk is combining SpaceX with his artificial intelligence startup xAI, creating a vertically integrated entity spanning rockets, satellites, AI models, data centers, and social media as the company prepares for a potential blockbuster public offering.

Musk announced the transaction Monday in a blog post, describing the merged company as “the most ambitious, vertically integrated innovation engine on (and off) Earth,” uniting AI, launch services, space-based internet, and the X social platform. Public filings with Nevada list Space Exploration Technologies Corp. as the managing member of X.AI Holdings, with the deal completed on Feb. 2.

According to Bloomberg, the combined entity could target an IPO valuation of $1.25 trillion, a figure that would place it among the most valuable companies globally. The move represents the largest consolidation yet across Musk’s business empire.

A Private-Market Powerhouse

SpaceX and xAI have both surged in private-market value. SpaceX last year opened a secondary sale at an $800 billion valuation, while xAI was valued at roughly $230 billion in a $20 billion round earlier this year. Tesla agreed last week to invest $2 billion into xAI, further tightening the web across Musk’s companies.

Musk expanded xAI’s footprint in early 2025 by merging it with X, formerly Twitter, giving the AI startup direct access to a massive real-time data stream.

Strategic Rationale and Scrutiny

The tie-up aligns with Musk’s long-term vision to pair AI with space infrastructure. SpaceX operates Starlink, with more than 9,000 satellites in orbit and roughly 9 million customers, and is the leading launch provider for NASA and the Department of Defense. Reuters reported SpaceX generated an estimated $8 billion in profit on $15–$16 billion of revenue in 2025.

xAI, by contrast, remains capital-intensive as it races to build infrastructure to compete with OpenAI and Google. The company is also facing regulatory probes in Europe, India, Australia, and California over misuse of its Grok tools, including the generation of sexualized or non-consensual images.

Musk argues the merger unlocks a step-change in compute economics. SpaceX recently asked the Federal Communications Commission for approval to deploy up to 1 million satellites as part of an “orbital data center.” “Within 2 to 3 years,” Musk wrote, “the lowest-cost way to generate AI compute will be in space.”

The Bigger Bet

The acquisition brings together profitable space operations with a fast-growing but cash-burning AI unit—potentially smoothing the path to public markets while amplifying regulatory and execution risk.

It also escalates Musk’s rivalry with OpenAI CEO Sam Altman, with whom Musk is locked in a legal dispute after co-founding OpenAI in 2015 and departing in 2018.

If successful, the merger could redefine how AI infrastructure is built and priced—on Earth and beyond. If not, it risks concentrating capital, regulatory exposure, and technical ambition at an unprecedented scale.

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