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Elon Musk’s rocket company SpaceX THERE Obtained xAI, the artificial intelligence firm founded by Musk three years ago, in a large, and unconventional, deal that combines two private companies into one company with an incredible $1.25 trillion reported valuation and plans for a historic IPO this year.
Musk, who is the CEO of two companies as well as a publicly traded electric vehicle and robotics company Tesladescribed the combination as one that “will 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 first real-time information and free speech platform,” he wrote in a blog post on the SpaceX website.
Musk cited the potential for space-based data centers, the energy-intensive computing facilities needed to use AI services, as one of the most important benefits of the combination, although the concept has yet to be proven and is largely theoretical. “The world’s electricity demand for AI simply cannot be met by terrestrial solutions, even in the near term,” Musk wrote in the blog post.
“By directly harnessing nearly constant solar power with minimal operating or maintenance costs, these satellites will revolutionize our ability to scale computing,” Musk wrote.
While reports of a potential deal emerged last week, the stratospheric value of the transaction and the speed with which it was closed left many industry observers stunned, underscoring high expectations around AI as well as fears of an overheated market that could be due for a reckoning.
According to the report of Bloombergthe deal between SpaceX and xAI will lead to a combined enterprise value of $1.25 trillion, with xAI shares worth $526.59 each. Musk is reportedly hashing out the potential terms of a SpaceX IPO this year company value of $800 billion, setting the stage for what could be the largest initial public offering of all time.
Representatives from SpaceX and xAI did not immediately respond to requests for comment.
Musk has a history of mixing his holdings
Musk, the world’s richest man, has a documented history of mixing financial interests in his businesses. In 2015, Tesla acquired Solar City, a solar energy company founded by Musk’s cousins and whose board Musk serves as chairman.
And in March 2025, xAI acquired X, the Musk-owned social platform formerly known as Twitter, in a $33 billion, all-stock deal. “The future of xAI and X are intertwined,” Musk said at the time.
Recently, Tesla surprised shareholders just last month when it revealed that it had investments failed $2 billion in xAI in exchange for a batch of preferred stock as part of xAI’s $20 billion Series E round of funding. That investment means Tesla shareholders now own preferred stock in a company that has become a subsidiary of SpaceX, which could raise questions from investors about Tesla’s role in funding xAI’s growth. In addition to the $2 billion investment, Tesla disclosed that it sold $430 million of Megapack battery storage and xAI systems in 2025, worth $285 million, reflecting the circular nature of Musk’s businesses.
What about Grok?
Musk xAI is established in 2023, with the stated goal of creating an AI that he describes as “truth-seeking,” and has a “rebellious streak.” The company’s Grok chatbot has sparked controversy since, recently acquired blocked in some countries for creating sexually profound fake images of women.
Musk did not mention Grok in Monday’s post announcing xAI’s merger with SpaceX, focusing his sights on further expanding AI capabilities unhindered by Earth-imposed limitations. “I mean, space is called ‘space’ for a reason,” Musk wrote, emphasizing his point with a crying emoji.
“This marks not only the next chapter, but the next book of SpaceX and xAI’s mission: scaling to create a sentient sun to understand the Universe and bring the light of consciousness to the stars!” Musk wrote.
Musk said that his estimate for the next two to three years is that the cheapest way to create AI computing will be in space and that “new companies” will quickly accelerate their achievements.
“The capabilities we open up by making space-based data centers a reality will fund and enable the growth of our own bases on the Moon, an entire civilization on Mars, and ultimately the expansion of the Universe,” Musk concluded.
This story was originally featured on Fortune.com
