Elon Musk’s SpaceX acquires AI startup xAI, targets $1.25 trillion IPO

Elon Musk just pulled his biggest corporate move yet, folding his artificial intelligence startup xAI into SpaceX as the combined company lines up for what could become one of the largest IPOs in history.

In a blog post published Monday, SpaceX said it had acquired xAI to form what Musk called “the most ambitious, vertically-integrated innovation engine on (and off) Earth,” spanning AI, rockets, space-based internet, direct-to-device communications, and the X social platform. The newly combined entity is expected to pursue a public offering that could value the business at roughly $1.25 trillion, according to reporting from Bloomberg.

“SpaceX has acquired xAI to form the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform. This marks not just the next chapter, but the next book in SpaceX and xAI’s mission: scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars,” SpaceX said in a blog post.

The move comes months after SpaceX agreed to invest $2 billion into xAI, as Musk escalates his AI push amid growing rivalry with OpenAI.

Elon Musk Merges SpaceX With xAI to Power AI Data Centers in Space

Public records filed with the state of Nevada and reviewed by CNBC show the transaction was completed on February 2, with Space Exploration Technologies Corp. listed as the managing member of X.AI Holdings. It is the largest internal consolidation across Musk’s companies and brings together two private-market standouts that have seen rapid valuation growth.

SpaceX last year opened a secondary share sale that valued the rocket maker at about $800 billion. xAI, launched in 2023, reached an estimated $230 billion valuation following a $20 billion funding round earlier this year, CNBC reported. Musk’s electric vehicle company, Tesla, agreed last week to invest roughly $2 billion into xAI, deepening the financial ties between Musk’s businesses.

The acquisition follows an earlier step in which xAI was folded into Musk’s social network X, formerly known as Twitter. That integration put xAI’s Grok chatbot directly inside the platform, giving the startup access to a massive real-time data stream and distribution channel. It also opened the door to new scrutiny.

xAI is now facing regulatory probes across multiple regions, including Europe, India, Australia, and California, after Grok tools allowed users to generate and circulate sexualized images of children and non-consensual intimate images of adults. The investigations arrive at a moment when Musk is pushing to scale xAI’s infrastructure to compete with more established players.

Musk founded SpaceX in 2002 and turned it into the leading provider of orbital launch services through contracts with NASA and the Department of Defense. The company also operates Starlink, its satellite internet network, which now includes more than 9,000 satellites and serves roughly 9 million customers worldwide under the Starlink brand.

xAI entered the scene much later, positioning itself as a rival to OpenAI after ChatGPT ignited the generative AI boom. Musk was among OpenAI’s co-founders when it launched as a nonprofit research lab in 2015, before leaving in 2018. He is now locked in a legal fight with the company and its CEO, Sam Altman, over its direction and governance.

Financially, the two businesses are on very different footing. Reuters reported last week that SpaceX generated an estimated $8 billion in profit on $15 billion to $16 billion in revenue in 2025, citing people familiar with the numbers. xAI, by contrast, continues to burn cash as it builds data centers and trains models at a pace required to keep up with leaders like Google.

Musk frames the acquisition as a long-range bet that blurs the line between space and compute. SpaceX has already asked the Federal Communications Commission for approval to launch up to one million satellites as part of what it calls an “orbital data center.” The idea is to shift large portions of AI compute off Earth, where Musk believes costs can fall sharply.

“My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space,” Musk wrote. “This cost-efficiency alone will enable innovative companies to forge ahead in training their AI models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and the invention of technologies to benefit humanity.”

If that vision holds, the SpaceX-xAI tie-up could redefine how investors think about AI infrastructure, blending launch economics, satellite networks, and model training into a single business heading toward public markets.

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