According to a Bloomberg report, SpaceX is considering a potential merger with Tesla while also evaluating an alternative option—integration with the artificial intelligence company xAI. Earlier the same day, Reuters reported that SpaceX and xAI were in discussions regarding a merger, aiming to complete the integration before a major IPO planned for later this year.
Musk is weighing options to consolidate his business empire.
On Thursday local time, according to Bloomberg, SpaceX is considering a potential merger with $Tesla (TSLA.US)$ , while also evaluating another option – integrating with the artificial intelligence company xAI. Earlier the same day, Reuters reported that SpaceX and xAI were in discussions about a possible merger to complete the integration ahead of a major IPO planned for later this year.
Regarding the potential merger between SpaceX and xAI, Reuters noted that if the deal goes through, Musk's rocket business, Starlink satellite network, social media platform X, and Grok AI chatbot will be brought under one corporate structure. This move would inject new momentum into SpaceX's strategy of launching data centers into space. As Musk competes with tech giants like Google, Meta, and OpenAI in the rapidly heating AI race, this step carries significant implications.
Musk is the world’s richest individual. He oversees electric vehicle manufacturer Tesla, SpaceX, artificial intelligence company xAI (which also controls his social media platform X), tunnel construction firm The Boring Co., and neurotechnology company Neuralink.
SpaceX is already the highest-valued private company globally, reaching a valuation of $800 billion in its latest internal share transaction. Previous reports indicated that SpaceX plans to go public at some point this year, with an expected valuation exceeding $1 trillion, and has already enlisted investment banks for its IPO.
Founded in 2002, SpaceX revolutionized the global aerospace industry with its reusable Falcon rockets and laid the groundwork for the rapid deployment of Starlink. Today, Starlink has grown into a space-based broadband network comprising thousands of satellites.
Reuters’ version of the SpaceX-xAI merger
According to Reuters, under the proposed merger plan, shares of xAI would be exchanged for SpaceX shares. Sources familiar with the matter stated that two entities have been established in Nevada to facilitate the transaction. Corporate filings in Nevada show both entities were incorporated on January 21. One is a limited liability company listing SpaceX and its Chief Financial Officer Bret Johnsen as managing members, while the other lists Johnsen as the sole executive.
As part of the deal, certain executives from xAI may be given the option to receive cash instead of SpaceX stock. However, no final agreement has been signed yet, and the timing and structure of the transaction remain uncertain. Details such as the valuation, core motivations, or potential timeline are currently unknown.
Data Centers in Space
Through xAI, Musk is building a large supercomputer named 'Colossus' for AI training in Memphis, Tennessee, USA. Last year, SpaceX agreed to invest $2 billion into xAI as part of the startup's $5 billion equity financing.
Musk stated last week in Davos, Switzerland: 'Placing AI in space will be the lowest-cost option and will become a reality within two years, three at the latest.'
Solar-powered space AI computing aims to reduce the computational cost required to operate and train AI models, such as xAI’s Grok. Meanwhile, Jeff Bezos’ Blue Origin announced plans to build a high-capacity backbone network consisting of thousands of satellites, while Google is also studying space-based data centers through Project Suncatcher.
However, constructing data centers in space is still considered a high-risk endeavor. Given the rapid yet highly uncertain development of AI investments, some analysts and industry executives question whether potential energy savings would be sufficient to offset the additional costs of customizing systems for the space environment.
Implications for Defense and Security
Caleb Henry, an analyst at Quilty Analytics, a space research and consulting firm, stated that incorporating xAI into SpaceX could enhance the company’s competitiveness in securing major defense contracts from the Pentagon. The U.S. Department of Defense is seeking to accelerate the application of AI within its military networks.
Earlier this month, U.S. Defense Secretary Pete Hegseth visited SpaceX’s Starbase development site in Texas and stated that xAI’s language model and its chat platform Grok would be integrated into military networks as part of the Pentagon’s 'AI Acceleration Strategy' to expedite military decision-making and planning.
xAI has secured a contract worth up to $200 million to provide Grok products to the Pentagon.
Starlink and its national security version, Starshield, already heavily rely on artificial intelligence, such as for automated satellite maneuvers in orbit. Starshield is building a network of hundreds of classified satellites under a contract with a U.S. intelligence agency. These satellites are equipped with various sensors and are expected to leverage AI to track moving targets on Earth.
The latest merger activities of companies under Musk's ownership
This is not the first time Musk has consolidated the enterprises under his control. In 2025, he merged the social media platform X into xAI through a stock swap, allowing the AI startup to access platform data and distribution channels. Earlier in 2016, he used Tesla shares to acquire his solar energy company SolarCity.
Earlier this month, xAI raised $20 billion in an oversubscribed Series E funding round, surpassing its initial target of $15 billion, with a valuation reaching $230 billion. Tesla announced on Wednesday that it agreed to invest approximately $2 billion in xAI.
Editor/Rice