A SpaceX Falcon Heavy rocket carrying the National Oceanic and Atmospheric Administration’s (NOAA) weather satellite Geostationary Operational Environmental Satellite U (GOES-U) lifts off from Launch Complex 39A at NASA’s Kennedy Space Center, Florida, June 25, 2024.
Miguel J. Rodriguez Carrillo | AFP | Getty Images
Elon Musk is combining rocket maker SpaceX with his artificial intelligence startup, xAI, as the merged entity gears up for a massive IPO.
The deal was announced on Monday in a blog post from Musk, who said he’s forming “the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet,” and the X social media platform.
The combined company is expected to price shares in an IPO that would value it at $1.25 trillion, Bloomberg reported. Public records with the state of Nevada, obtained by CNBC, indicate that the deal was completed on Feb. 2, with Space Exploration Technologies Corp. listed as the “managing member” of X.AI Holdings.
The transaction marks the largest tie-up in Musk’s vast business portfolio and brings together two companies that have been soaring in value on the private markets. SpaceX opened a secondary share sale last year at a valuation of $800 billion, while xAI was valued at about $230 billion in a $20 billion round that closed earlier this year.
Investors in the most recent, xAI funding round included Nvidia and Cisco Investments, as well as longtime Musk company backers Valor Equity Partners, Stepstone Group, Fidelity, Qatar Investment Authority, Abu Dhabi’s MGX and Baron Capital Group.
Tesla, Musk’s electric vehicle maker and the source of most of his liquid wealth, said last week that it was also investing about $2 billion into xAI.
Executives at SpaceX and xAI didn’t respond to requests for comment on whether the merger may require regulatory review, for example, by the Committee on Foreign Investment in the United States (CFIUS).
Early last year, Musk expanded xAI by merging it with his social network X, formerly known as Twitter. Now xAI is facing regulatory probes in multiple jurisdictions internationally, after its Grok AI tools enabled users to generate and share sexualized images of children and non-consensual intimate images of adults, mostly women.
In January, the Department of Defense initiated use of Grok within the Pentagon. The DoD is allowing information that flows through its military intelligence databases to be analyzed using Grok, Google’s Gemini and other AI-based systems.
SpaceX is a far bigger defense contractor than xAI today, with tens of billions of dollars worth of federal government contracts.
Started two decades apart
Musk founded the reusable rocket maker in 2002, and has turned it into the leading provider of orbital launch services through contracts with NASA and the DoD. SpaceX also owns and operates the Starlink satellite internet service, which has more than 9,000 satellites in orbit and roughly 9 million customers.
In 2023, Musk launched xAI as a potential competitor to OpenAI, which kicked off the generative AI boom with the release of ChatGPT late the prior year. Musk was one of the co-founders of OpenAI in 2015, when the project was started as a nonprofit AI lab. He left in 2018, and is now involved in a heated legal battle with the company and CEO Sam Altman.
Reuters reported late last week that SpaceX generated an estimated $8 billion in profit on $15 billion to $16 billion of revenue in 2025, citing two people familiar with the company’s results.
Meanwhile, xAI’s finances are more tenuous as the cash-burning company tries to build up its costly infrastructure to keep pace with OpenAI and Google, which were earlier to AI and are ahead in the race to build the most widely used model.
The Starlink logo appears on a smartphone screen with a starry night sky in the background.
Nurphoto | Nurphoto | Getty Images
Musk is framing the deal as part of a strategic futuristic plan to put data centers in space. SpaceX recently asked the Federal Communications Commission for authorization to launch up to 1 million satellites as part of its “orbital data centers.”
“My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space,” Musk wrote in Monday’s post. “This cost-efficiency alone will enable innovative companies to forge ahead in training their AI models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and invention of technologies to benefit humanity.”
Grok isn’t the only source of controversy at xAI. The company has faced significant community backlash in and around Memphis, Tennessee, where it’s building out its infrastructure, starting with its Colossus facility.
The NAACP and environmental groups in Memphis have tried to stop xAI from using gas-burning turbines to power the supercomputer facility in the area, and residents complained about the emissions adding to air pollution woes. In nearby Southaven, Mississippi, where xAI is building even more data infrastructure, the community has protested noise levels from its equipment.
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