SpaceX acquires xAI in deal valuing combined group at more than $1 trillion
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Elon Musk has merged two of his most ambitious ventures, with SpaceX confirming it has acquired artificial intelligence start up xAI in a deal that values the combined group at more than $1 trillion, according to a person familiar with the transaction.
Terms of the deal were not publicly disclosed. The source said xAI was valued at $125 billion and SpaceX at $1 trillion, making the aerospace company the most valuable private company in the world.
In a memo posted on SpaceX’s website, Musk described the merger as the creation of an “innovation engine” that will bring artificial intelligence, rockets, satellite internet and media assets under one structure.
The move further consolidates Musk’s sprawling business empire, tightening links between SpaceX, xAI, Tesla and X, the social media platform formerly known as Twitter.
Regulatory scrutiny and investor questions
xAI was launched after Musk acquired X in 2022. Initially operating as a division within the social media company, it used access to vast streams of real time user content to train artificial intelligence models. By spring 2025, xAI had been incorporated as a standalone entity and had achieved a higher valuation than X.
Its flagship product, the chatbot Grok, has drawn scrutiny in recent months. Regulators in the European Union and the United Kingdom opened investigations into X after concerns that Grok’s image generation tools were used to create sexualised images. In January, xAI said it had introduced tighter restrictions limiting users’ ability to edit images.
Emma Wall, chief investment strategist at Hargreaves Lansdown, said the merger unites Musk’s leadership in two frontier industries.
“He is the market leader in two incredibly important technologies, artificial intelligence and space exploration,” Wall said in an interview. “But these valuations reflect a multi decade vision. Investors are pricing in a future where energy generation, data centres and computing infrastructure extend into space.”
Wall cautioned that many of the proposed benefits are long term. “We are talking about 10, 20, even 30 years before some of this becomes economically meaningful on Earth,” she said.
Tesla’s strategic pivot toward AI and robotics
The deal follows Tesla’s announcement last month that it would invest $2 billion in xAI. Musk told Tesla investors that he envisaged xAI acting as an “orchestra conductor” for Tesla’s factories, coordinating fleets of autonomous robots.
Tesla has already signalled a strategic shift toward robotics and artificial intelligence. The company recently said it would halt production of two vehicle models as it reallocates resources toward humanoid robots, branded Optimus, and broader automation systems.
The pivot has unsettled some shareholders. In a vote last year on closer ties between Tesla and xAI, abstentions and votes against the proposal outnumbered votes in favour. Critics argued that diverting capital toward another Musk controlled venture risked diluting Tesla’s focus at a time of intense competition in electric vehicles.
SpaceX, meanwhile, has been widely reported to be preparing for a potential initial public offering. Emily Zheng, a senior analyst at PitchBook, said consolidating xAI under SpaceX strengthens its case to public market investors.
“The cost of computing infrastructure, specialised chips and energy is enormous,” Zheng said. “Bringing these assets together allows SpaceX to present a capital efficient growth story ahead of any IPO.”
An initial public offering, or IPO, marks the first time a private company sells shares to public investors.
Scaling AI beyond Earth
Artificial intelligence development requires vast amounts of computing power and electricity, prompting companies to seek new energy solutions. In his memo, Musk argued that space may ultimately provide the answer.
“In the long term, space based AI is obviously the only way to scale,” he wrote.
Musk said SpaceX would prioritise launching AI satellites as an immediate focus. Over time, he suggested that orbiting data centres powered by solar energy could support expanding artificial intelligence workloads without straining Earth’s energy grids.
He linked the merger to broader ambitions, including permanent human settlements beyond Earth.
“The capabilities we unlock by making space based data centres a reality will fund and enable self growing bases on the Moon, an entire civilization on Mars and ultimately expansion to the Universe,” Musk wrote.
The merger further tightens Musk’s control over a network of interrelated companies. Last March, xAI acquired X in an all stock transaction that Musk said would combine data, computing power and talent. Neuralink and The Boring Company now appear to be the only significant Musk ventures operating outside the SpaceX umbrella.
By integrating artificial intelligence with launch capabilities and satellite infrastructure, Musk is positioning SpaceX not only as a space transport company but also as a central platform for computing and robotics. Whether public investors will embrace that vision, and at what valuation, will become clearer if and when SpaceX proceeds with a public listing.
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