SpaceX is in discussions to merge with other companies controlled by Elon Musk, including artificial intelligence startup xAI, as the rocket manufacturer prepares for a potential initial public offering later this year, Reuters reported.
The discussions with xAI could consolidate SpaceX's launch business and Starlink satellite network with the X social media platform and the Grok chatbot under a single corporate structure, according to a person familiar with the matter and regulatory filings reviewed by Reuters. The value, timing, and primary rationale of any potential deal could not be determined. Bloomberg has also reported that SpaceX has considered a merger with Tesla, Musk's electric vehicle company.
SpaceX is widely expected to seek a public listing with a valuation exceeding US$1 trillion, according to Reuters and other media. Any large transaction ahead of an IPO could complicate that process, while also reshaping how investors assess Musk's portfolio of businesses spanning space, artificial intelligence, and electric vehicles.
Musk, the world's wealthiest person, serves as chief executive of SpaceX and xAI, which controls X. He also runs Tesla, tunnel builder The Boring Company, and neurotechnology firm Neuralink.
Deal structure and Nevada filings
Under a potential SpaceX-xAI transaction, xAI shares would be exchanged for SpaceX stock, the person familiar with the discussions told Reuters. Some xAI executives could be given the option to receive cash instead of shares.
Two corporate entities were established in Nevada on January 21, 2025, to facilitate a possible transaction, filings show. While the filings do not specify their purpose, one entity lists SpaceX and its chief financial officer, Bret Johnsen, as managing members. The other lists Johnsen as its sole officer. Johnsen did not respond to a request for comment.
No final agreement has been signed, and the timing and structure of any transaction remain fluid, the source said.
Market reaction and investor views
Investors are weighing which combination of Musk's businesses might make the most strategic sense. Gene Munster, managing partner at xAI investor Deepwater Asset Management and a Tesla shareholder, said it was likely that xAI would ultimately be folded into either SpaceX or Tesla.
"What's important for Elon is to have a massive vision that he's early on," Munster said, adding that a Tesla-xAI combination could strengthen the automaker's robotics and self-driving ambitions.
Some Tesla shareholders have long advocated consolidating Musk's companies. "A major risk thesis for Tesla is that Musk is spreading himself out too much," said Dennis Dick, chief market strategist at Stock Trader Network. "As a Tesla shareholder, I applaud further consolidation."
AI and space infrastructure
Folding xAI into SpaceX could add momentum to Musk's efforts to deploy data centers in orbit, Reuters reported. Musk has promoted space-based computing as a way to reduce the cost of powering and cooling artificial intelligence systems, saying at the World Economic Forum in Davos last week that space could become the lowest-cost location for AI computing within a few years.
Analysts and executives have cautioned that space-based AI processing remains an unproven and risky proposition, questioning whether potential energy savings would outweigh the cost and complexity of operating systems in orbit.
A merger could also strengthen SpaceX's position in the defense sector, according to Caleb Henry of Quilty Analytics, as the Pentagon moves to accelerate the adoption of AI across military networks. US Defense Secretary Pete Hegseth recently visited SpaceX's Starbase site in Texas, where he said xAI's Grok system would be integrated into military networks as part of an AI acceleration strategy.
Prior consolidations and investor loyalty
Musk has a history of combining his businesses. In 2016, Tesla acquired solar energy company SolarCity in an all-stock deal. Last year, Musk folded X into xAI through a share swap that gave the AI startup access to the social media platform's data and distribution.
According to The Information, such moves have often benefited investors who backed Musk across multiple ventures. After Musk's leveraged buyout of Twitter, investors later received xAI shares at a valuation comparable to X's take-private price, restoring value on paper.
The Information reported that a merger with SpaceX would similarly allow xAI investors to exchange their holdings for shares in a larger, fast-growing company, while providing a path to take the capital-intensive AI business to public markets.
Financial ties between the companies are already significant. xAI recently raised US$20 billion in an upsized Series E round, valuing it at US$230 billion, including a US$2 billion commitment from Tesla, the Wall Street Journal reported. That followed a US$2 billion investment commitment from SpaceX last year.
Article edited by Jerry Chen
