Elon Musk’s SpaceX acquiring AI startup xAI ahead of potential IPO
A SpaceX Falcon Heavy rocket carrying the National Oceanic and Atmospheric Administration (NOAA) weather satellite Geostationary Operational Environmental Satellite U (GOES-U) lifts off from Launch Complex 39A at NASA’s Kennedy Space Center in Florida on June 25, 2024.
Miguel J. Rodríguez Carrillo | AFP | Getty Images
Elon Musk is merging rocket maker SpaceX with artificial intelligence startup xAI, and the merger is gearing up for a major IPO.
The deal was announced on Monday blog post Musk said he was building “the most ambitious, vertically integrated innovation engine on (and off) Earth with artificial intelligence, rockets, space-based internet, and the X social media platform.”
According to Bloomberg, the combined company is expected to price its shares in the IPO at $1.25 trillion. Public records for the state of Nevada obtained by CNBC show that the deal was completed on February 2, with Space Exploration Technologies Corp. listed as a “managing member.” X.AI holdings.
The transaction marks the largest merger in Musk’s vast business portfolio and brings together two companies whose value has soared in private markets. SpaceX launched an $800 billion secondary share sale last year, while xAI was valued at approximately $230 billion in a $20 billion round completed earlier this year.
Investors in the latest xAI funding round included Nvidia and Cisco Investments, as well as long-time backers of Musk’s company, 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, too, had invested about $2 billion in xAI.
SpaceX and xAI executives did not respond to requests for comment on whether the merger would require regulatory review, for example by the Committee on Foreign Investment in the United States (CFIUS).
Early last year, Musk expanded xAI by combining it with the social network X, previously known as Twitter. Now xAI is facing regulatory investigations in multiple jurisdictions internationally, After Grok AI tools enabled users to create and share sexualized images of children and non-consensual intimate images of adults (mostly women).
In January, The Department of Defense initiated the use of Grok in the Pentagon. The Department of Defense allows information flowing from military intelligence databases to be analyzed using Grok, Google Gemini and other artificial intelligence-based systems.
SpaceX is a much larger defense contractor than xAI today, with federal government contracts worth tens of billions of dollars.
It started twenty years apart
Musk founded the reusable rocket maker in 2002 and grew it into a leading provider of orbital launch services through contracts 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.
Musk launched xAI as a potential rival to OpenAI in 2023, kicking off the prolific AI boom with the launch of ChatGPT late the previous year. Musk co-founded OpenAI in 2015, when the project was launched as a nonprofit artificial intelligence laboratory. He left in 2018 and is currently embroiled in a heated legal battle with the company and CEO Sam Altman.
Reuters reported late last week that SpaceX had an estimated profit of $8 billion in 2025 on revenue of $15 billion to $16 billion, citing two people familiar with the company’s results.
Meanwhile, xAI’s finances are weaker and weaker as the cash-burning company struggles to build out its costly infrastructure to keep up with OpenAI. GoogleCompanies that have been involved in artificial intelligence before and are ahead in the race to create the most widely used model.
The Starlink logo appears on a smartphone screen with a starry night sky in the background.
Nurfoto | Nurfoto | Getty Images
Musk frames the deal as part of a strategic futuristic plan to place data centers in space. SpaceX recently asked the Federal Communications Commission for authorization to launch up to 1 million satellites as part of “orbital data centers.”
“My prediction is that within 2 to 3 years the lowest-cost way to produce AI computing will be in space,” Musk said in a post on Monday. “This cost efficiency alone will allow innovative companies to advance training AI models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and the invention of technologies that will benefit humanity.”
Grok isn’t the only source of controversy on xAI. The company faced significant social backlash in and around Memphis, Tennessee, where it built its infrastructure, starting with the Colossus facility.
The NAACP and environmental groups in Memphis tried to block xAI from using gas-burning turbines to power its supercomputer facility in the area, and residents complained about the emissions adding to air pollution problems. Community protests in nearby Southaven, Mississippi, where xAI is building even more data infrastructure noise levels from his equipment.
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