Elon Musk’s rocket company SpaceX has acquired xAI, the artificial intelligence company founded by Musk three years ago, in a substantial and unconventional transaction that merges the two privately held firms into a single entity with an astonishing reported valuation of $1.25 trillion and plans for a landmark initial public offering (IPO) this year.
Musk, who serves as CEO for both companies, as well as for the publicly traded electric vehicle and robotics company Tesla, described the combination as one that 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 foremost real-time information and free speech platform,” he articulated in a blog post.
Musk cited the potential for space-based data centers—the energy-intensive computing facilities essential for powering AI services—as one of the most significant advantages of the merger, even though the concept remains unproven and largely theoretical. “Global electricity demand for AI simply cannot be met with terrestrial solutions, even in the near term,” Musk wrote in the blog post.
“By directly harnessing near-constant solar power with little operating or maintenance costs, these satellites will transform our ability to scale compute,” Musk stated.
While reports of a potential deal surfaced last week, the extraordinary value of the transaction and the speed of its closure left many industry observers in awe, highlighting both the immense expectations surrounding AI and concerns about a potentially overheated market that could be due for a correction.
According to reports, the deal between SpaceX and xAI will result in a combined enterprise value of $1.25 trillion, with xAI shares valued at $526.59 each. Musk has reportedly been negotiating the prospective terms of a SpaceX IPO this year that would value the company at $800 billion, setting the stage for what could be the largest initial public offering of all time.
Representatives from SpaceX and xAI did not immediately respond to requests for comment.
Musk’s history of intertwining his ventures
Musk, the world’s wealthiest individual, has a documented history of blending the financial interests of his various businesses. In 2015, Tesla acquired Solar City, a solar energy company founded by Musk’s cousins, on whose board Musk served as chairman.
And in March 2025, xAI acquired X, the Musk-owned social platform formerly known as Twitter, in a $33 billion, all-stock deal. “xAI and X’s futures are intertwined,” Musk commented at the time.
More recently, Tesla disclosed just last month that it invested $2 billion in xAI in exchange for a batch of preferred stock as part of xAI’s $20 billion Series E funding round. That investment means Tesla shareholders now own preferred stock in a company that has become a subsidiary of SpaceX, which could raise questions from investors about Tesla’s role in funding xAI’s growth. In addition to the $2 billion investment, Tesla revealed it sold $430 million of Megapack battery storage and systems to xAI in 2025, costing it $285 million, demonstrating the circular nature of Musk’s businesses.
The status of Grok
Musk launched Grok with the stated objective of creating an AI he described as “truth seeking,” and possessing a “rebellious streak.” The company’s Grok chatbot has attracted controversy ever since, recently facing criticism for producing sexualized deepfake images of women.
Musk did not mention Grok at all in Monday’s post announcing xAI’s merger with SpaceX, focusing instead on his vision of vastly expanding AI tech capabilities without the limitations imposed by Earth. “I mean, space is called ‘space’ for a reason,” Musk wrote, emphasizing his point with a cry-laughing emoji.
“This marks not just the next chapter, but the next book in SpaceX and xAI’s mission: scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars!” Musk proclaimed.
Musk stated his estimate that over the next two to three years, the most cost-effective way to generate AI compute will be in space, and that “innovative companies” will rapidly accelerate their breakthroughs.
“The capabilities we unlock by making space-based data centers a reality will fund and enable self-growing bases on the Moon, an entire civilization on Mars and ultimately expansion to the Universe,” Musk concluded.