Elon Musk merges SpaceX and xAI in USD 1.25 trillion deal

Elon Musk confirmed on Monday, 2 February 2026, that his aerospace company, SpaceX, has acquired his artificial intelligence startup, xAI. The transaction merges two of the world’s most valuable private companies into a single entity ahead of a planned initial public offering (IPO) later this year.

Transaction terms and valuation

The deal values the combined company at approximately USD 1.25 trillion. Before the merger, SpaceX held a valuation of roughly USD 800 billion following a secondary share sale in late 2025. xAI reached a USD 230 billion valuation in January 2026 after raising USD 20 billion in Series E funding.

According to reports from Reuters, xAI investors will receive 0.1433 shares of SpaceX for every share of xAI they hold. Some xAI executives also have the option to take cash at a rate of USD 75.46 per share. This merger represents the largest acquisition in history, surpassing the USD 203 billion purchase of Mannesmann by Vodafone in 2000.

Strategic shift to orbital computing

The merger shifts the focus of Musk’s AI development from Earth to orbit. In a statement on the SpaceX website, Musk noted that terrestrial data centers face growing constraints from high electricity costs and cooling requirements. He estimates that space-based AI will become the lowest-cost way to generate computing power within two to three years.

SpaceX recently filed a request with the Federal Communications Commission (FCC) to launch up to one million satellites designed to function as orbital data centers. These satellites will use unfiltered solar energy and radiative cooling to power AI workloads. Musk stated that the goal is to add 100 gigawatts of AI compute capacity annually.

Corporate structure and assets

The acquisition brings several of Musk's holdings under the SpaceX umbrella:

• Grok: The AI chatbot developed by xAI.

• X (formerly Twitter): The social media platform, which xAI acquired in early 2025.

• Starlink: The satellite internet network that will provide the connectivity for orbital data centers.

This consolidation follows a USD 2 billion investment in xAI by Tesla in January 2026. Because Tesla is a public company, it remains a separate entity, though its investment now grants Tesla shareholders an indirect stake in the combined SpaceX-xAI business.

Market context and IPO plans

The merger comes as SpaceX prepares for an IPO that could raise up to USD 50 billion. Industry analysts suggest the consolidation provides xAI investors with a clear exit strategy while giving SpaceX a new revenue stream to fund Mars colonization.

SpaceX recorded approximately USD 15 billion in revenue and USD 8 billion in profit in 2025. By contrast, xAI has faced high operational costs due to the purchase of hardware and energy for its terrestrial supercomputers, such as the "Colossus" facility in Memphis, Tennessee.

Federal agencies, including NASA and the U.S. Department of Defense, maintain the authority to review the deal for national security risks. SpaceX currently holds billions of dollars in government contracts for launch services and satellite operations.