A SpaceX Falcon Heavy rocket carrying the National Oceanic and Atmospheric Administration (NOAA) Geostationary Operational Environmental Satellite U (GOES-U) weather satellite lifts off from Launch Complex 39A at NASA’s Kennedy Space Center, Florida, June 25, 2024.
Miguel J. Rodriguez Carrillo | AFP | Getty Images
Elon Musk combines rocket maker SpaceX with its artificial intelligence startup, xAI, as the merged entity prepares for a massive IPO.
The agreement was announced Monday in a blog post by Musk, who said it formed “the most ambitious, vertically integrated innovation engine on (and off) Earth, along with AI, rockets, the space Internet” and social media platform X.
The combined company is expected to price its shares in an IPO that would value it at $1.25 trillion, Bloomberg reported. Nevada state public records, obtained by CNBC, show the deal closed on Feb. 2, with Space Exploration Technologies Corp. being listed as a “managing member” of X.AI Assets.
The transaction represents the most significant tie-up in Musk’s vast business portfolio and brings together two companies whose value has soared in private markets. SpaceX opened a secondary stock sale last year at a valuation of $800 billion, while xAI was valued at around $230 billion during a $20 billion round. farm earlier this year.
Investors from the latest xAI funding round included Nvidia And Cisco Investmentsas well as long-time corporate backers Musk, Valor Equity Partners, Stepstone Group, Fidelity, Qatar Investment Authority, MGX of Abu Dhabi and Baron Capital Group.
TeslaMusk’s electric vehicle maker and the source of most of his liquid wealth, said last week that it was also investing around $2 billion in xAI.
SpaceX and xAI executives did not respond to requests for comment on whether the merger might require regulatory review, such as by the Committee on Foreign Investment in the United States (CFIUS).
Early last year, Musk expanded xAI by merging it with his social network X, formerly known as Twitter. Now, xAI is the subject of regulatory investigations in several international jurisdictions., after its Grok AI tools allowed users to generate and share sexualized images of children and non-consensual intimate images of adults, primarily women.
In January, the Department of Defense launched the use of Grok within the Pentagon. The DoD allows analysis of information flowing through its military intelligence databases using Grok, Google’s Gemini and other AI-based systems.
SpaceX is now a much larger defense contractor than xAI, with federal government contracts worth tens of billions of dollars.
Started two decades apart
Musk founded the reusable rocket maker in 2002 and built it into the leading provider of orbital launch services through contracts with NASA and the DoD. SpaceX also owns and operates the Starlink satellite internet service, which has more than 9,000 satellites in orbit and approximately 9 million customers.
In 2023, Musk launched xAI as a potential competitor to OpenAI, which kicked off the generative AI boom with the release of ChatGPT late the previous year. Musk was one of the co-founders of OpenAI in 2015, when the project launched as a nonprofit AI lab. He left the company in 2018 and is now embroiled in a heated legal battle with the company and its CEO, Sam Altman.
Reuters reported last week that SpaceX generated an estimated profit of $8 billion on revenue of $15 billion to $16 billion in 2025, citing two people familiar with the company’s results.
Meanwhile, xAI’s finances are more precarious as the cash-burning company attempts to build its expensive infrastructure to keep pace with OpenAI and Googlewhich predated AI and are ahead in the race to build the most widely used model.
Starlink logo appears on a smartphone screen with a starry sky in the background.
Nuphoto | Nuphoto | Getty Images
Musk frames the deal as part of a futuristic strategic plan to install data centers in space. SpaceX recently asked the Federal Communications Commission for permission to launch up to 1 million satellites as part of its “orbital data centers.”
“My estimate is that within 2-3 years, the cheapest way to generate AI calculations will be in space,” Musk wrote in his Monday post. “This cost efficiency alone will enable innovative companies to move forward in training their AI models and processing data at unprecedented speeds and scales, accelerating advances in our understanding of physics and the invention of technologies for the benefit of humanity.”
Grok isn’t the only source of controversy at xAI. The company has faced significant backlash from the community in and around Memphis, Tennessee, where it is building its infrastructure, starting with its Colossus facility.
The NAACP and environmental groups in Memphis have tried to block xAI from using gas turbines to power the region’s supercomputer, and residents have complained about emissions that worsen air pollution problems. In nearby Southaven, Mississippi, where xAI is building even more data infrastructure, the community has protested. noise levels of his equipment.
