SpaceX valuation after xAI merger nears Tesla

Elon Musk’s move to merge SpaceX with his cash-burning artificial intelligence startup xAI signals changing guards on his corporate empire.

Tesla’s It has been the source of much of Musk’s liquid wealth and fame. But Tesla’s market cap of about $1.58 trillion after Monday’s merger is only 26% higher than SpaceX’s stated private market valuation of $1.25 trillion.

Musk owns an estimated 43% stake in SpaceX, compared to a 13% stake in Tesla. This means SpaceX represents more than half of Musk’s paper fortune, which stands at more than $852 billion. Forbes Real Time Billionaires index.

And Tesla’s value is on the decline as it starts the year with a 6% decline so far in 2026. In early January, Tesla reported a 16% year-over-year decline in vehicle deliveries, and later in the month announced that total revenue would fall 3% in 2025, the first annual decline in history.

Tesla’s core automotive business has been struggling lately due to intense competition from electric vehicle makers in China and Europe and the recent elimination of the federal tax incentive for EV purchases in the United States. The brand has also suffered from Musk’s foray into politics, including his work with the Trump administration and support from far-right figures in Europe.

As Tesla’s EV sales weaken, Musk is shifting the company’s focus to its Robotaxi ride-hailing efforts and Optimus humanoid robots, markets where Tesla faces heavy competition and where it currently has no real business.

Last week, Musk told analysts that Tesla was ending production of its Model S and X vehicles as it realigned its priorities. These older models accounted for less than 3% of Tesla’s annual vehicle deliveries in 2025, and the company now plans to use the lines on which they are assembled for Optimus.

Musk has a much stronger market position in SpaceX.

The rocket manufacturer is a leading provider of orbital launch services through contracts worth billions of dollars annually with NASA and the Department of Defense. SpaceX also owns and operates the Starlink satellite internet service, which has more than 9,000 satellites in orbit and nearly 9 million customers, and even operates the company town of Starbase, Texas.

Since SpaceX is reportedly pursuing an IPO this year, the company is in a particularly advantageous position with its business partner and former SpaceX investor Jared Isaacman at the helm of NASA.

The merger, announced on Monday, values ​​SpaceX at $1 trillion and xAI at $250 billion, according to documents viewed by CNBC. The deal follows an earlier merger of two Musk entities last year, in which xAI acquired social media platform X, formerly known as Twitter, in a stock transaction.

Musk has an army of fans and corporate backers, as well as retail shareholders who own Tesla through the platforms below robinhoodThey named the intertwined group of companies “Muskonomi”.

Musk said SpaceX acquired xAI to develop data centers in space and escape what he sees as energy constraints on Earth.

In a note published Tuesday, Moffett Nathanson analysts wrote that the possibility of a private orbital data center proposed in a filing by SpaceX with the Federal Communications Commission would require “simply enormous” capital needs. SpaceX has requested permission to launch up to 1 million satellites as part of this initiative.

“At the very least, given the required operational maturity, supply chain development and financial requirements, it can be concluded that a full-fledged build will not occur anytime soon,” analysts wrote.

Making this work will require technical solutions yet to be developed to manage radiation and cooling in space, beyond the costs of launching and assembling high volumes of heavy equipment.

Despite the high valuation SpaceX currently enjoys (only eight U.S. companies are worth more), the merger could bring additional headaches to shareholders.

Besides diverting SpaceX’s profits to fund xAI’s hefty infrastructure costs, there are also plenty of legal risks and regulatory concerns that come with the new company.

XAI is being investigated by authorities in markets such as Europe, India, Malaysia and the US. California attorney general after Grok image generator allowed users to create and share “deepfake” images of children and women.

Musk on X in the name The raid is a “political attack”.

Eric Talley, a law professor at Columbia University, said some of the regulatory risks xAI faces may have to be borne by SpaceX investors. While SpaceX’s defense contracting business is focused on the United States, the bulk of its Starlink business is international.

“Different regulators may say that you have to be in overall good standing as an organization to continue doing business in their jurisdiction,” Talley said. Even if SpaceX subsidiaries don’t create liability for each other, they can influence each other’s “regulatory status,” he said.

Such challenges could be manageable for Musk as long as SpaceX remains privately owned and retains control without having to worry about wild fluctuations in stock prices. But whether SpaceX can maintain its public market valuation at high levels while taking on new risks related to xAI is a very different debate.

Accordingly ReutersSpaceX generated nearly $15 billion in revenue and $8 billion in profits last year. Tesla, meanwhile, reports sales of about $95 billion in 2025, with adjusted earnings of about $5 billion; This marks a sharp decline from 2024.

In order for Musk to liquidate his SpaceX assets, Wall Street would need to buy in at his company’s announced valuation.

Tesla shareholders have at least some interest in a positive outcome. The EV company said last week that it had agreed to invest $2 billion in xAI as part of a financing round that closed earlier this month.

“Tesla’s recent xAI investment is now a SpaceX investment,” Ann Lipton, a law professor at the University of Colorado and former corporate and securities attorney, said in an email. The merger is merely “evidence that Musk is willing to participate in transactions across his empire, but we already knew that.”

Tesla investors may be hopeful that the prospect of a $1 trillion payout in the long term will keep him from getting too carried away, as they worry that Musk is focusing too much of his attention outside the company.

The payment package for Musk, approved by shareholders in November, consists of 12 share tranches that will be given if Tesla reaches a certain target. milestonesIncluding market value gains and operational successes over the next decade. The first tranche of stock will be paid out if Tesla’s market cap reaches $2 trillion (about $400 billion more than the current valuation).

— CNBC’s Robert Frank, David Faber and Ari Levy contributed to this report.

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