On June 25, 2024, a SpaceX Falcon Heavy rocket carrying the National Oceanic and Atmospheric Administration’s (NOAA) Geostationary Operational Environmental Satellite-U (GOES-U) lifts off from Launch Complex 39A at NASA’s Kennedy Space Center in Florida.
Miguel J. Rodriguez Carrillo | AFP | Getty Images
Elon Musk is merging rocket maker SpaceX and his artificial intelligence startup xAI, with the combined company gearing up for a major IPO.
The partnership was announced Monday in a blog post by Musk, who said the company is leveraging AI, rockets, the space-based internet, and the X social media platform to form “the most ambitious vertically integrated innovation engine on Earth (and beyond).”
The combined company is expected to value its shares at $1.25 trillion in its IPO, Bloomberg reports. Nevada state documents obtained by CNBC show the deal was completed on February 2, with Space Exploration Technologies Corp. listed as a “managing member” of X.AI Holdings.
The deal is the biggest partnership in Musk’s vast business portfolio, combining two companies whose values have soared in the private markets. SpaceX launched a secondary stock sale last year at a valuation of $800 billion, while xAI was valued at about $230 billion in a $20 billion round that closed earlier this year.
Investors in the latest xAI funding round included Nvidia and Cisco Investments, as well as longtime Musk backers Valor Equity Partners, Stepstone Group, Fidelity, Qatar Investment Authority, Abu Dhabi’s MGX, and Baron Capital Group.
Tesla, Musk’s electric car maker and the source of most of his liquid assets, also announced last week that it was investing about $2 billion in xAI.
SpaceX and xAI executives did not respond to requests for comment on whether the merger might require regulatory review, including by the Committee on Foreign Investment in the United States (CFIUS).
Early last year, Musk expanded xAI by integrating it with his social network X, formerly known as Twitter. xAI currently faces regulatory investigations in multiple international jurisdictions. The company’s Grok AI tool allows users to generate and share sexual images of children and non-consensual intimate images of adults (mostly women).
In January, the Department of Defense began using Grok within the Pentagon. The Department of Defense allows information flowing through military intelligence databases to be analyzed using Grok, Google’s Gemini, and other AI-based systems.
SpaceX is now a much larger defense contractor than xAI, with federal contracts worth tens of billions of dollars.
We started 20 years apart.
Musk founded the reusable rocket maker in 2002 and built it into a leading provider of orbital launch services through contracts with NASA and the Department of Defense. SpaceX also owns and operates the Starlink satellite internet service, which has more than 9,000 satellites in orbit and approximately 9 million customers.
In 2023, Musk launched xAI as a potential competitor to OpenAI, and the generative AI boom began with the release of ChatGPT late the previous year. Musk was one of the co-founders of the OpenAI project in 2015 when it started as a nonprofit AI lab. He left the company in 2018 and is currently engaged in a bitter legal battle with the company and CEO Sam Altman.
Reuters reported late last week that SpaceX generated an estimated profit of $8 billion in 2025 on revenue of $15 billion to $16 billion, citing two people familiar with the company’s financial results.
Meanwhile, xAI’s finances show that the cash-wasting company has googleAI was early on the scene and is ahead in the race to build the most widely used models.
The Starlink logo will be displayed on your smartphone screen against a starry sky.
Null Photo | Null Photo | Getty Images
Musk envisions the deal as part of a future strategic plan to establish data centers in space. SpaceX recently asked the Federal Communications Commission for permission to launch up to 1 million satellites as part of an “orbital data center.”
“My estimate is that within a few years, the lowest cost way to generate AI computing will be in space,” Musk wrote in a post Monday. “This cost efficiency alone will enable innovative companies to advance AI model training and data processing at unprecedented speed and scale, accelerating breakthroughs in understanding physics and inventing technologies that benefit humanity.”
Grok is not the only source of controversy in xAI. The company has faced significant backlash in Memphis, Tennessee, and the surrounding area, where it is building infrastructure including the Colossus facility.
The NAACP and Memphis environmental groups are trying to block xAI from using gas-fired turbines to power supercomputing facilities in the area, but residents have complained that the emissions are exacerbating the air pollution problem. In nearby South Haven, Mississippi, where xAI is building out more data infrastructure, the community is protesting the noise levels from its equipment.
Watch: CNBC’s full interview with NASA’s Jared Isaacman
