Elon Musk's SpaceX and xAI to merge in landmark $1.25 Trillion deal ahead of IPO

Elon Musk’s SpaceX, is set to merge with his artificial intelligence startup, xAI, in a deal valuing the combined entity at approximately $1.25 trillion. The move, first reported by Bloomberg News on 2 February, aims to consolidate Musk’s aerospace and AI ambitions under a single corporate umbrella ahead of a highly anticipated initial public offering (IPO). The merger unifies several of Musk’s major assets, including the Starlink satellite constellation, the X social media platform, and the Grok AI chatbot. According to a memo detailing the transaction, the combined company is expected to price its shares at approximately $527 each. The deal follows a period of rapid growth for both firms; SpaceX was recently valued at $800 billion in a private share sale, while xAI reached a valuation of $230 billion in November 2025. By bringing these ventures together, Musk intends to create a vertically integrated "innovation engine" capable of dominating both orbital infrastructure and generative intelligence. A primary driver for the merger is Musk’s vision for "space-based AI." Regulatory filings indicate that SpaceX is seeking permission to launch up to one million satellites designed to operate as solar-powered orbital data centres. Musk stated that terrestrial power constraints and cooling requirements make land-based AI scaling difficult. "In the long term, space-based AI is obviously the only way to scale," Musk noted, estimating that spaceborne computation could become more cost-effective than terrestrial alternatives within two to three years. The merger marks the largest M&A (Mergers and Acquisitions) deal in history, surpassing the $203 billion acquisition of Mannesmann by Vodafone in 2000. It also positions the new entity for a historic IPO later this year, which analysts suggest could raise up to $50 billion and push the company's valuation towards $1.5 trillion. While the deal strengthens the "Muskonomy," it may draw scrutiny from regulators regarding governance and potential conflicts of interest, given Musk’s overlapping leadership roles. SpaceX currently holds significant federal contracts with NASA and the US Department of Defence, both of which maintain authority to review major mergers for national security risks.