Entrepreneur Elon Musk has merged his leading space company SpaceX with his AI firm xAI. The combined entity prepares for a massive initial public offering.
Musk announced the deal on Monday in a blog post. “The most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet,” he said, including the X social media platform.
Bloomberg reports the merged firm aims for a $1.25 trillion valuation in its IPO. Nevada records confirm the transaction closed on 2 February, with Space Exploration Technologies Corp as the managing member of X.AI Holdings.
This is the biggest link-up in Musk’s business empire. It pairs two high-flying private firms. SpaceX valued at $800 billion in last year’s secondary sale. xAI hit $230 billion after a $20 billion funding round earlier this year.
Recent xAI backers include Nvidia and Cisco Investments, plus Musk stalwarts like Valor Equity Partners, Stepstone Group, Fidelity, Qatar Investment Authority, Abu Dhabi’s MGX, and Baron Capital Group.
Musk’s EV giant Tesla, his key cash source, revealed last week a $2 billion stake in xAI. SpaceX and xAI leaders stayed silent on potential regulatory reviews, such as by CFIUS.
Over a year ago, Musk bolstered xAI by absorbing his X platform, formerly Twitter. Now xAI faces global probes over Grok AI. Users generated sexualised images of children and non-consensual adult visuals, mainly of women.
This January, the U.S. Department of Defense began using Grok in the Pentagon alongside Google’s Gemini and other AIs for intelligence analysis. SpaceX far outstrips xAI as a defence contractor with billions in federal contracts.
Musk launched SpaceX in 2002 for reusable rockets. It leads orbital launches via NASA and DoD deals, and runs Starlink with 9,000+ satellites for 9 million users.
xAI started in 2023 to rival OpenAI, whose 2022 ChatGPT ignited the AI boom. Musk co-founded OpenAI in 2015, left in 2018, and now battles it legally.
Reuters sources say SpaceX made $8 billion profit on $15-16 billion revenue in 2025.
xAI burns cash building infrastructure to chase OpenAI and Google in top AI models.
Musk views the merger as a path to space-based data centres as SpaceX seeks approval for 1 million satellites.
“My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space,” Musk wrote. “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.”