SpaceX is weighing potential mergers with other companies controlled by Elon Musk as it prepares for what could be one of the largest initial public offerings in history.
It’s a move that is forcing investors to reassess how Musk’s sprawling empire of space, AI, and electric vehicles might ultimately fit together.
The rocket maker is in discussions to merge with AI startup xAI ahead of a planned IPO later this year, Reuters reported, citing a person familiar with the matter and regulatory filings. Such a deal would combine SpaceX with xAI, which owns the X social media platform and develops the Grok chatbot, effectively bringing rockets, satellites, social media, and AI under a single corporate structure.
SpaceX is also considering a merger with Tesla, Musk’s electric vehicle company, Bloomberg reported, adding another layer of complexity to a possible consolidation of Musk’s businesses.
The value, timing and precise rationale for any of the potential deals could not be independently confirmed. Musk, SpaceX, xAI, and Tesla did not respond to requests for comment.
A push to consolidate
SpaceX is expected to go public sometime this year at a valuation that could exceed $1 trillion. That would make it one of the largest IPOs ever and a milestone for a company that has reshaped the global space industry through reusable rockets and its Starlink satellite network.
The company was valued at roughly $800 billion in a recent private share sale, making it the world’s most valuable privately held firm. By comparison, xAI was valued at $230 billion in November, while Tesla’s market capitalization stands near $1.4 trillion.
For SpaceX, a major merger could complicate the IPO process but also significantly expand its ambitions. A combination with xAI, in particular, would accelerate Musk’s efforts to integrate AI more deeply into space-based infrastructure, including plans to deploy data centers in orbit.
Investor reactions
Some investors see consolidation as a natural evolution of Musk’s long-term vision. Tesla shareholder Gene Munster, managing partner at Deepwater Asset Management, which invests in xAI, said, “I think it’s highly likely that (xAI) ends up with one of the two parties.”
“What’s important for Elon is to have a massive vision that’s way out there that he’s early on,” Munster said, adding that Tesla acquiring xAI could strengthen the automaker’s robotics and self-driving ambitions.
Others argue that merging Musk’s companies could address concerns that he is spread too thin. “Musk has too many separate companies,” said Dennis Dick, chief market strategist at Stock Trader Network. “A major risk thesis for Tesla is that Musk is spreading himself out too much. As a Tesla shareholder, I applaud further consolidation.”
Tesla shares rose about 3% in after-hours trading following reports of the talks.
AI in orbit
A merger with xAI would bolster SpaceX’s push to deploy data centers in space, an ambitious idea aimed at lowering the cost of AI computing by using solar power and orbital infrastructure. Musk has argued that space-based AI processing could eventually be cheaper than Earth-based alternatives.
Speaking last week in Davos, Switzerland, Musk said, “the lowest cost place to put AI will be in space. And that will be true within two years, maybe three at the latest.”
The concept remains controversial. Analysts have questioned whether potential energy savings outweigh the high cost and technical risk of building and maintaining AI systems in orbit, especially given the rapid pace of AI model evolution.
A combined SpaceX–xAI entity could also strengthen the company’s position in defense contracting. xAI has secured a Pentagon contract worth up to $200 million to provide Grok products, and U.S. Defense Secretary Pete Hegseth recently said xAI’s technology would be integrated into military networks as part of an “AI acceleration strategy.”
Starlink and its defense-focused counterpart, Starshield, already rely heavily on AI for tasks such as automated satellite maneuvers. Starshield is building a classified satellite network for a U.S. intelligence agency, widely expected to use AI to track moving targets on Earth.
A pattern
Musk has a history of merging his businesses. In 2016, Tesla acquired solar installer SolarCity in a stock deal. Last year, Musk folded X into xAI, giving the AI startup access to the platform’s data and distribution. SpaceX also committed $2 billion to xAI as part of a $5 billion fundraising round.
This month, xAI raised $20 billion in an upsized Series E round, surpassing its $15 billion target, and secured a roughly $2 billion investment commitment from Tesla.
Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and an investor in both Tesla and xAI, summed up the appeal bluntly: “It’s like a bunch of overvalued companies merging together into one big overvalued mess run by Elon. But it’s a pure play now. It’s like, you want to invest in Elon? Here you go.”
As SpaceX edges closer to the public markets, investors may soon have to decide whether betting on Musk means betting on one company—or an entire ecosystem.
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