Elon Musk is merging his rocket maker SpaceX together with his artificial intelligence startup xAI in a deal that modifications what a future SpaceX IPO represents.
After rumors surfaced last week, Musk confirmed the transfer Monday in a SpaceX blog post, calling the mixed firm “essentially the most bold, vertically built-in innovation engine on (and off) Earth,” spanning AI, rockets, space-based web, and his social media platform, X. Public information filed in Nevada and obtained by CNBC present the deal was accomplished Feb. 2, with Area Exploration Applied sciences Corp. listed because the managing member of X.AI Holdings.
Bloomberg reports the merged firm is anticipated to cost shares in an IPO that would worth it at $1.25 trillion. At that scale, the story is now not nearly rockets. It’s about AI, and Musk’s declare that the way forward for compute won’t be confined to Earth.
A $1.25 trillion IPO that appears very totally different
Earlier than the deal, a SpaceX IPO would have given buyers publicity to launch companies, authorities contracts, Starlink’s satellite tv for pc web enterprise, and Musk’s long-term Mars ambitions.
Now it might additionally embrace a frontier AI firm and a brand new thesis: AI can not scale on terrestrial infrastructure. It should scale in orbit.
SpaceX was valued at about $800 billion in a secondary share sale final yr. xAI was valued at roughly $230 billion in a $20 billion funding spherical earlier this yr. The proportion uplift is bigger for SpaceX, whereas xAI shareholders acquire stability by being folded into one of the vital worthwhile non-public aerospace corporations.
Reuters reported final week that SpaceX generated an estimated $8 billion in revenue on $15 to $16 billion in income in 2025, citing individuals accustomed to the outcomes. Against this, xAI remains to be burning money because it races to construct infrastructure to compete with OpenAI and Google, which stay forward within the mannequin race. The merger ties these two trajectories collectively.
“It appears like Elon Musk has one window to do a giant IPO, and he needs to benefit from that,” Edward Niedermeyer, creator of Ludicrous: The Unvarnished Story of Tesla Motors and an auto trade analyst instructed Quick Firm final week.
Musk’s core declare: Earth can not energy the way forward for AI
Musk argues that AI’s reliance on power-hungry information facilities is unsustainable, as rising demand strains each electrical grids and the atmosphere. His resolution is to maneuver the issue off planet. “Area is known as ‘area’ for a cause,” he mentioned within the weblog submit, arguing that there will likely be extra room off the planet.
“My estimate is that inside 2 to three years, the bottom value method to generate AI compute will likely be in area,” Musk continued. “This value effectivity alone will allow modern corporations to coach their AI fashions and course of information at unprecedented speeds and scales.”
SpaceX has already requested the Federal Communications Fee for authorization to launch as much as a million satellites as a part of what Musk calls an orbital data center.
Orbital information facilities powered by the Solar
The orbital information heart plan would require launching a million tons of satellites per yr. Every ton generates 100 kW of compute, which equals 100 gigawatts of AI capability added yearly.
Even in 2025, essentially the most prolific yr in orbital historical past, humanity launched solely about 3,000 tons of payload into area, principally Starlink satellites aboard Falcon rockets.
The distinction now’s Starship. Musk envisions Starship launching each hour, carrying roughly 200 tons per flight, delivering tens of millions of tons to orbit per yr.
SpaceX already operates the world’s largest satellite tv for pc constellation by means of Starlink, with greater than 9,000 satellites in orbit and roughly 9 million prospects. The operational classes from Starlink type the inspiration for one thing a lot bigger: satellites that perform as AI information facilities.
A well-known Musk playbook
This isn’t the primary time Musk has merged his corporations to maneuver sooner. Early final yr, he merged xAI with X (previously Twitter). Now xAI is being folded into SpaceX. Tesla, the first supply of Musk’s liquid wealth, mentioned final week it has agreed to take a position about $2 billion into xAI.
The merger additionally pulls SpaceX into xAI’s regulatory scrutiny.
xAI is dealing with probes in Europe, India, Australia, and California after its Grok AI instruments allowed customers to generate sexualized images of children and non consensual intimate images of adults utilizing photographs discovered on-line. These investigations add danger to an organization that’s already spending closely to catch up within the AI arms race.
Folding xAI into SpaceX offers it monetary cowl and operational scale, however it additionally ties SpaceX’s future IPO to these controversies.
Past orbit: the Moon and deep area
Musk’s imaginative and prescient doesn’t cease with satellites circling Earth.
Starship’s capacity to land heavy cargo on the Moon opens the opportunity of lunar manufacturing. Factories might use lunar supplies to construct satellites and deploy them deeper into area utilizing electromagnetic mass drivers. Musk argues that at that scale, humanity begins to harness extra of the Solar’s power.
The enterprise case is less complicated. If area turns into the most affordable place to run AI compute, all the pieces else follows.
“The capabilities we unlock by making space-based information facilities a actuality will fund and allow self-growing bases on the Moon, a complete civilization on Mars and in the end enlargement to the Universe,” Musk wrote within the weblog submit.
