In a move that could redefine the global technology landscape, Elon Musk’s SpaceX and xAI are in talks to merge. This strategic combination aims to integrate Musk’s diverse portfolio into a single powerhouse. Specifically, the deal would bring reusable rockets, Starlink satellites, and the Grok AI chatbot under one roof ahead of a highly anticipated public offering.
The merger would unify Musk’s most valuable private assets. Consequently, the combined entity would be positioned to dominate the race for AI supremacy against rivals like Google, Meta, and OpenAI.
The Structure of the Proposed Deal
According to internal filings, the transaction would involve an exchange of xAI shares for SpaceX stock. To facilitate this, two new corporate entities were established in Nevada on January 21, 2026.
Key details of the proposed merger include:
- Lead Facilitators: SpaceX CFO Bret Johnsen is listed as the primary officer for the new Nevada entities.
- Executive Options: Some xAI leaders may have the choice to receive cash instead of SpaceX equity.
- Fluid Structure: While the framework is in place, a final agreement has not yet been signed. Therefore, the timing remains subject to change.
Valuation and the Path to $1 Trillion
If the merger proceeds, it will create one of the most valuable corporate entities in history. Currently, SpaceX is the world’s most valuable private company, with a valuation of $800 billion. Meanwhile, xAI was valued at $230 billion in late 2025.
Industry analysts expect the combined company’s valuation to exceed $1 trillion when it lists on public markets later this year.
Strategic Goal: AI Data Centers in Orbit
A primary driver for the merger is Musk’s vision to move AI processing into space. Speaking recently in Davos, Musk predicted that space-based AI would become the most cost-effective solution within three years.
The benefits of space-based data centers include:
- Solar Power: Utilizing constant solar energy to run massive training models.
- Cooling Efficiency: Using the cold environment of space to manage heat from high-performance servers.
- Cost Reduction: Cutting the massive energy expenses of Earth-based supercomputers like xAI’s “Colossus.”
Pentagon Integration and Defense Contracts
The merger is expected to significantly strengthen SpaceX’s relationship with the U.S. Department of Defense. Currently, the Pentagon is seeking to accelerate AI adoption to speed up military decision-making.
Earlier this month, U.S. Defense Secretary Pete Hegseth confirmed that xAI’s Grok will be integrated into military systems. Furthermore, xAI already holds a $200 million contract with the Pentagon.
Existing Military Synergy:
- Starshield: SpaceX’s classified network already uses AI for automated maneuvers and target tracking.
- Decision Support: Integrating Grok is a key part of the Pentagon’s new “AI acceleration strategy.”
A History of Consolidation
This deal follows a pattern of Musk merging his businesses. For example, in 2025, he folded the social media platform X into xAI to grant the startup access to real-time data. Years prior, he orchestrated Tesla’s acquisition of SolarCity.
As SpaceX lines up banks for its upcoming IPO, this merger would create a vertically integrated giant. Ultimately, it would handle everything from satellite broadband to advanced artificial intelligence.
