SpaceX, xAI in talks over merger ahead of potential IPO: Report
Elon Musk’s SpaceX and artificial intelligence startup xAI are in talks over a potential merger ahead of an initial public offering planned for later this year, Reuters reported, citing a person familiar with the matter and two recent company filings it reviewed.
The proposed combination would bring together SpaceX’s launch vehicles and Starlink satellite network under a single corporate structure with Musk’s X social media platform and xAI’s Grok chatbot, the source said. Reuters is reporting the talks exclusively.
Under the proposed structure, xAI shares would be exchanged for SpaceX shares, the news source stated. Two Nevada-based entities were formed to facilitate the transaction. Some xAI executives may be offered cash instead of SpaceX stock, although a final agreement has not been signed and the timing and structure of the deal remains unclear.
Reuters said it could not independently determine the transaction’s valuation, its underlying strategic rationale or when it might be completed.
Increase space-based AI targets
The merger talks come as Musk has aggressively pivoted into artificial intelligence, positioning SpaceX as a key platform for deploying orbital data centers to support AI workloads.
Speaking at the World Economic Forum in Davos last week, Musk said “the lowest-cost place to deploy AI will be in space” and predicted that space-based AI infrastructure could become viable within two to three years.
SpaceX committed $2 billion to xAI as part of a $5 billion equity-raising round last year, the Wall Street Journal previously reported. Through xAI, Musk is also building a large artificial intelligence supercomputer known as “Colossus” in Memphis, Tennessee.
Industry players are increasingly exploring space-based computing. Jeff Bezos’ Blue Origin has announced plans for a high-capacity satellite backbone network, while Google is exploring orbital data centers through its Project Suncatcher initiative.
Defense contracts and strategic leverage
Quilty Analytics research director Caleb Henry said combining xAI with SpaceX could strengthen the company’s position in securing US defense contracts.
“The Pentagon is rapidly moving towards AI-enabled systems, and having this capability vertically integrate with satellite infrastructure is a strategic advantage,” Henry told Reuters.
xAI has a contract worth up to $200 million to supply Grok AI products to the Pentagon. SpaceX’s Starlink and its defense-focused Starshield unit already rely heavily on artificial intelligence for satellite operations, including automated maneuvers in orbit.
Starshield is also developing a secret satellite network for a US intelligence agency that is expected to use AI-powered sensors to track targets on Earth.
Valuations and IPO plans
SpaceX is now the world’s most valuable private company, valued at about $800 billion in a recent insider stock sale, according to sources familiar with the transaction. xAI was valued at $230 billion in November, the Wall Street Journal reported.
Reuters and other media outlets reported that SpaceX was preparing for an IPO earlier this year and that the expected valuation would exceed $1 trillion. SpaceX is already lining up banks for a potential IPO, sources said.
Earlier this month, xAI raised $20 billion in an expanded Series E funding round, surpassing its original target of $15 billion. Tesla announced Wednesday that it has agreed to invest nearly $2 billion in xAI.
Not Musk’s first in-house deal
The potential merger would be the latest in a series of transactions combining companies controlled by Musk. In 2025, Musk brought X into xAI through a share swap, giving the AI startup access to the platform’s data and distribution. Tesla acquired Musk’s solar energy company SolarCity in an all-stock deal in 2016.
Founded in 2002, SpaceX transformed the space industry with its reusable Falcon rockets and enabled the rapid deployment of Starlink, which now consists of thousands of satellites in orbit.
Musk is the CEO of SpaceX and xAI and also runs Tesla and Neuralink.
