According to a Reuters report on Thursday, SpaceX is in talks to merge with xAI ahead of a highly anticipated public offering planned for later this year. Such a deal would place Musk’s rockets, Starlink satellite network, X social media platform and the Grok chatbot within one corporate umbrella, according to a source familiar with the matter and two regulatory filings. Separately, Bloomberg reported that SpaceX is also considering a merger with Tesla, adding another layer of complexity to the possible reshaping of Musk’s companies.
“I think it’s highly likely that xAI ends up with one of the two parties,” said Gene Munster, a Tesla shareholder and managing partner at Deepwater Asset Management, which invests in xAI. Munster argued that Musk’s long-term strategy is driven less by short-term financial logic and more by sweeping, future-oriented visions. In his view, a particularly compelling scenario would be Tesla acquiring xAI, strengthening the carmaker’s ambitions in robotics and self-driving technology.
Elon Musk, the world’s richest man, currently serves as chief executive of SpaceX and xAI, which also controls the X social media platform. He also leads Tesla, tunnel construction firm The Boring Company and neurotechnology startup Neuralink. None of Musk, SpaceX, xAI or Tesla responded to requests for comment on the reported discussions, though Tesla shares rose 3% in after-hours trading following the news.
Market sentiment has already begun to price in the possibilities. On Thursday, predictions platform Polymarket put the likelihood of a SpaceX–xAI merger by mid-year at 48%, while the probability of a Tesla–xAI combination was estimated at 16%.
SpaceX is widely expected to go public sometime this year, with a valuation that could exceed $1 trillion, according to Reuters and other media reports. The company is already the most valuable privately held firm in the world, valued at roughly $800 billion in a recent private share sale. By comparison, xAI was valued at $230 billion in November, according to the Wall Street Journal, while Tesla’s market capitalization currently stands at about $1.4 trillion.
While a major merger could complicate SpaceX’s initial public offering, analysts note that it could also accelerate the company’s ambitions in space-based data infrastructure—an increasingly strategic front in the global AI arms race with rivals such as OpenAI, Meta Platforms and Google. SpaceX has set its sights on deploying data centers in orbit, an idea Musk believes could dramatically lower the cost of AI computation.
Some Tesla shareholders have long advocated for tighter integration across Musk’s companies. Bloomberg previously reported that investors have pushed for a SpaceX–Tesla tie-up. “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.”
Under the proposed SpaceX–xAI structure, xAI shares would be exchanged for SpaceX shares, according to the source familiar with the talks. Two new entities have reportedly been established in Nevada to facilitate the process. Regulatory filings show that both were set up on January 21, though they do not specify their precise role. One entity lists SpaceX and its chief financial officer, Bret Johnsen, as managing members, while the other lists Johnsen as the sole officer. Johnsen did not respond to requests for comment.
The discussions remain fluid. Some xAI executives may be offered cash in place of SpaceX stock, and no final agreement has been reached. The timing and structure of any deal could still change significantly.
At the heart of the strategic rationale is artificial intelligence infrastructure—specifically, the concept of data centers in space. Powered by solar energy, space-based AI processing is pitched as a way to reduce the massive energy costs required to train and run large language models such as xAI’s Grok. Musk has publicly argued that space will soon become the cheapest location for AI computing.
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.” Critics, however, have questioned the feasibility of the idea, citing the rapid and unpredictable evolution of AI and the high costs of designing and maintaining systems capable of operating in space.
The competitive landscape is already forming. Jeff Bezos’ Blue Origin has announced plans for a high-capacity satellite backbone network, while Google is researching space-based data centers under its Project Suncatcher initiative.
A merger with xAI could also enhance SpaceX’s appeal to the U.S. military. The Pentagon has been accelerating its adoption of artificial intelligence, and closer integration between SpaceX’s satellite systems and xAI’s software could strengthen bids for defense contracts, according to Caleb Henry of space research firm Quilty Analytics.
This month, U.S. Defense Secretary Pete Hegseth visited SpaceX’s Starbase facility in Texas, where he said xAI’s Grok language model and chat platform would be integrated into military networks as part of an “AI acceleration strategy” designed to speed up decision-making and operational planning. xAI already holds a Pentagon contract worth up to $200 million to supply Grok products.
Meanwhile, xAI is building a massive AI training supercomputer in Memphis, Tennessee, known as Colossus. SpaceX’s Starlink and national security-focused Starshield satellite networks already rely heavily on AI for tasks such as automated orbital maneuvers. Under a classified contract with a U.S. intelligence agency, Starshield is developing a constellation of hundreds of satellites equipped with sensors widely expected to use AI to track moving targets on Earth.
The prospect of consolidation is not new for Musk. In 2016, Tesla acquired solar energy firm SolarCity using its own stock. More recently, Musk folded X into xAI through a share swap that gave the AI startup access to the platform’s vast data and user base. SpaceX has also committed heavily to xAI, providing a reported $2 billion investment as part of a $5 billion equity fundraising round last year.
This month, xAI raised $20 billion in an expanded Series E funding round, surpassing its original $15 billion target and reaffirming its $230 billion valuation. It also secured an investment commitment of roughly $2 billion from Tesla.
Ross Gerber, chief executive of Gerber Kawasaki Wealth and Investment Management and an investor in both Tesla and xAI, said he could imagine Musk’s companies ultimately combining. “It’s like a bunch of overvalued companies merging together into one big overvalued mess run by Elon,” he said. “But it’s a pure play now. It’s like, you want to invest in Elon? Here you go. You get all of this. And it’s much more attractive, actually, as an investment.”
Whether through SpaceX, Tesla or xAI, the emerging picture suggests Musk may be moving toward a more unified corporate structure—one that binds rockets, satellites, cars, social media and artificial intelligence into a single, audacious vision of the future.