Elon Musk is connecting his rocket manufacturing company, SpaceX, with his artificial intelligence venture, xAI, as the newly formed entity prepares for a major IPO. The SpaceX & xAI Merger Announced by Elon Musk on Monday through a blog post by Musk, who stated that he is creating “the most ambitious, vertically-integrated innovation engine on (and off) Earth, incorporating AI, rockets, space-based internet,” along with the X social media platform.
According to some sources, the combined entity is anticipated to set share prices in an IPO that would appraise it at $1.25 trillion. Public records from the state of Nevada reveal that the transaction was finalised on February 2, with Space Exploration Technologies Corp. designated as the “managing member” of X.AI Holdings.
SpaceX Acquires xAI
Elon Musk’s SpaceX is set to acquire xAI, as the billionaire works to unify his diverse business interests. SpaceX has confirmed the acquisition of xAI, a smaller enterprise known for its Grok chatbot, by sharing a memo from Musk about the merger on its official website. Recently, Musk’s electric vehicle manufacturer, Tesla, also announced that it had invested $2 billion in xAI.
In the communication, Musk expressed that the merger would establish an “innovation engine” that combines AI, rockets, space-based internet, and media under one umbrella. Nevertheless, a source familiar with the situation mentioned that xAI is valued at $125 billion (£91 billion) and SpaceX at $1 trillion, making it the most valuable private company to date and making Elon Musk Richest Person on Earth with $800+ Bn Net Worth.
What is xAI and Why Is It Important?
xAI was established by Elon Musk in 2023, aiming to “comprehend the genuine essence of the universe.” The organisation was founded as a direct response to Musk’s concerns about the trajectory of artificial intelligence.
xAI rapidly attracted interest with its chatbot Grok, which is integrated with X (previously known as Twitter), and its emphasis on developing AI systems that Musk asserts are more transparent, truth-oriented, and in harmony with human values.
What does this mean for Tesla Investors?
The question for Tesla investors is: how does this impact the $2 billion that Tesla has recently invested in xAI? This investment now serves as an indirect stake in the newly formed SpaceX-xAI entity. Thus, Tesla shareholders effectively own a small portion of SpaceX through this investment. The arrangement also brings forth significant questions:
Tesla is evidently not part of “Musk Inc.”
When merger rumours first emerged last week, there was speculation that Tesla could be included in a three-way merger. However, that did not occur, and it is unlikely to happen easily, considering Tesla’s public shareholder base and the fiduciary challenges of merging a public company with a private one.
This creates a clearer understanding of Musk’s empire: SpaceX-xAI-X on one side (space, AI, social media), and Tesla on the other (vehicles, energy, robotics). The pressing question is whether Musk’s focus and priorities will shift towards the larger, more ambitious entity.
The cash flow is directed one way
Tesla is currently directing billions in shareholder capital into an entity that competes for Musk’s attention and potentially for AI talent and resources. Reports indicate that SpaceX generated profits ranging from $2 to $5 billion in 2025. In contrast, xAI is experiencing significant cash burn as it strives to compete with OpenAI, Google, and Anthropic.
By merging the two, Musk provides xAI with access to SpaceX’s profitable operations to support its AI ambitions, but the more likely goal is to offer xAI investors an exit strategy through SpaceX’s imminent IPO.
