SpaceX Moves To Absorb Elon Musk’s AI Startup xAI
Elon Musk has taken another step toward consolidating his business empire, with SpaceX confirming it is acquiring his artificial intelligence company, xAI.
The aerospace firm announced the move by publishing an internal memo from Musk, in which he described the merger as a way to bring artificial intelligence, space technology, satellite internet and media platforms under a single structure. SpaceX said the combination would create what Musk called a powerful “innovation engine”.
Financial terms of the transaction were not made public. However, a person familiar with the deal said xAI was valued at about $125bn (£91bn), while SpaceX was valued at roughly $1tn— a figure that would make it the most valuable privately held company in the world.
The acquisition follows a $2bn investment in xAI by Musk’s electric vehicle company, Tesla, announced last month. At the time, Musk told Tesla shareholders that xAI could play a central role in coordinating autonomous robots across Tesla’s factories.
That announcement came alongside a major strategic shift at Tesla, where Musk revealed plans to stop producing two vehicle models in order to focus more heavily on robotics. The investment faced resistance from some Tesla shareholders, with more votes cast against or abstaining than in favour during a previous vote on the matter.
Industry observers say the SpaceX–xAI deal may also be linked to preparations for a future stock market listing. SpaceX has been widely reported to be exploring an initial public offering (IPO).
Emily Zheng, a senior analyst at PitchBook, said the merger bears the hallmarks of a company positioning itself for public markets.
“The massive costs associated with computing power, infrastructure and energy are pushing some of the most valuable private tech companies toward public listings,” she said. “Bringing these businesses together allows SpaceX to present a more efficient and compelling growth story to investors.”
In his memo, Musk argued that space-based infrastructure could ultimately solve the energy constraints faced by AI development. He said the near-term priority would be deploying AI-focused satellites, but added that the long-term vision extended far beyond that.
According to Musk, space-based data centres could eventually help finance permanent settlements on the Moon and Mars, as well as support broader ambitions for human expansion beyond Earth.
With the deal, only Neuralink and The Boring Company remain outside Musk’s larger corporate structures.
xAI has evolved rapidly since its origins as a project within X, the social media platform formerly known as Twitter, which Musk acquired in 2022. The platform’s real-time data was initially used to help train AI models. By early 2025, xAI had been spun out as a standalone company and was valued more highly by investors than X itself.
xAI later acquired X in an all-stock transaction, with Musk saying the move would unite data, computing power, distribution and talent.
The company’s flagship product, the Grok chatbot, has attracted attention from regulators in recent months. Authorities in the European Union and the UK have launched investigations into X over concerns that Grok was used to generate inappropriate images. In response, xAI said in January that it had introduced new limits on image-editing features available to users.
