SpaceX has acquired xAI, Elon Musk’s artificial intelligence company, in a deal that values the combined entity at $1.25 trillion, according to Bloomberg. The merged company is preparing for a June IPO that could raise $50 billion.
“SpaceX has acquired xAI to form the most ambitious, vertically-integrated innovation engine on (and off) Earth,” Musk wrote in a statement posted to SpaceX’s website Monday.
The deal combines SpaceX, valued at $800 billion in December, with xAI, valued at $230 billion in January, according to PitchBook. An IPO at $1.25 trillion would place the combined company among the top 10 most valuable publicly traded firms in the U.S.
David Adubiina
SpaceX generated between $2 billion and $5 billion in profit on $15 billion to $16 billion of revenue in 2025, according to Reuters, citing people familiar with the results. xAI is burning through roughly $1 billion per month trying to compete with OpenAI, Google, and Anthropic, Bloomberg reported.
“xAI shareholders effectively get a lifeline through the deal,” Axios reported, citing a source familiar with the transaction.
What’s included
The combined entity brings together:
- SpaceX's rocket and satellite operations
- Starlink satellite internet (9,000+ satellites, 9 million customers)
- xAI's Grok chatbot and AI models
- X social media platform (xAI acquired X in 2025 for $33 billion)
SpaceX derives up to 80% of its revenue from launching its own Starlink satellites, according to Reuters. The merger creates a built-in customer for SpaceX launches while giving xAI access to SpaceX’s profitable operations.
Tesla shareholders are indirectly affected. Tesla invested $2 billion in xAI last month, meaning Tesla shareholders now own a stake in the SpaceX-xAI entity but have no governance rights.
The space data center pitch
Musk framed the merger around plans for orbital data centers. “Current advances in AI are dependent on large terrestrial data centers, which require immense amounts of power and cooling,” he wrote. “Global electricity demand for AI simply cannot be met with terrestrial solutions, even in the near term.”
SpaceX filed with the Federal Communications Commission for authorization to launch up to 1 million satellites as part of what it calls “orbital data centers.” Musk estimates space will become the cheapest way to generate AI compute within two to three years.
xAI is currently building massive ground-based data centers in Memphis to compete with established AI companies. The company has faced community backlash over its Memphis facilities. SpaceX would need to dramatically accelerate Starship production to deploy orbital infrastructure at the scale Musk describes.
Regulatory concerns
The merger comes as xAI faces scrutiny over its Grok chatbot. The Washington Post reported Monday that Musk loosened restrictions on Grok, contributing to it being used to generate sexual imagery of adults and children.
Multiple countries, including Indonesia, Malaysia, and the Philippines, temporarily banned Grok in January after it was used to create at least 1.8 million sexualized images, according to The New York Times and the Center for Countering Digital Hate.
The Pentagon began using Grok in January for military intelligence analysis. SpaceX holds tens of billions of dollars in defense contracts, raising questions about how the merger affects those agreements and whether it will face regulatory review.
What’s next
The June IPO would be one of the largest in history. Saudi Aramco holds the record at $1.9 trillion in 2019.
Musk owns roughly 42% of SpaceX with 79% voting control, 18% of Tesla, and a controlling stake in xAI, according to public filings. The merger further consolidates his control across rockets, AI, social media, and electric vehicles.
Whether orbital data centers prove viable or not, the deal solves xAI’s cash burn problem while positioning SpaceX for its public debut.
Emmanuel Umahi
