SpaceX acquired artificial intelligence firm xAI in a $1.25 trillion merger that sent US space stocks climbing on Tuesday. The deal creates the world's most valuable private company ahead of a planned public offering that could raise $50 billion this June.
Elon Musk announced the acquisition in a Monday statement on SpaceX's website, describing the combined entity as "the most ambitious, vertically-integrated innovation engine on (and off) Earth." The merger values SpaceX at $1 trillion and xAI at $250 billion, according to people familiar with the transaction.
Space-related stocks gained immediately following the announcement. Rocket Lab and Planet Labs rose approximately 3 percent in premarket trading, while AST SpaceMobile and Globalstar added 2.4 percent and 1.3 percent respectively. Intuitive Machines gained 2.1 percent and Redwire climbed 4.9 percent.
The combined company plans to pursue an initial public offering around June that could become the largest in history. Musk reportedly aims to raise about $50 billion through the offering, which would value the merged SpaceX-xAI entity between $1.25 trillion and $1.5 trillion.
SpaceX's acquisition provides financial support to xAI, which has spent heavily to compete in the AI development race. The merger also gives potential investors exposure to both space infrastructure and artificial intelligence through a single public listing.
Musk cited space-based data centers as the primary rationale for combining the companies. "Global electricity demand for AI simply cannot be met with terrestrial solutions," he wrote in the announcement memo.
"The only logical solution is to transport these resource-intensive efforts to a location with vast power and space."
The billionaire predicts space will offer the most cost-effective environment for AI computation within two to three years. SpaceX has requested regulatory approval to launch up to one million satellites that would orbit Earth and harness solar power for AI data centers.
This merger continues Musk's pattern of consolidating his business interests. xAI acquired social media platform X in early 2025, and Tesla announced a $2 billion investment in xAI last month.
SpaceX invested $2 billion in xAI last year, creating circular financial relationships among Musk's companies.
SpaceX maintained an $800 billion valuation in a December 2025 share sale, while xAI raised $20 billion at a $230 billion valuation in January. The combined entity now surpasses Saudi Aramco's $1.7 trillion market capitalization as the most valuable private company globally.
Industry analysts view the merger as validation for space-based AI infrastructure. "This is the strongest validation yet that space will be the backbone of the next wave of AI," said Seraphim Space CEO Mark Boggett.
The investment firm noted global space technology investment continues climbing, driven by government defense spending and private launch capacity.
SpaceX's Starlink satellite internet service, with over 9,000 operational satellites, now generates more revenue than the company's launch business. This provides a funding source for xAI's capital-intensive AI projects while supporting Musk's vision of orbital data centers.
The merger faces regulatory scrutiny and market skepticism about combining social media, AI chatbots, and rocket technology. xAI's Grok chatbot has drawn international investigations over nonconsensual deepfake image generation, creating reputational challenges for the combined entity.
Musk's consolidation mirrors his 2016 maneuver when Tesla acquired SolarCity using stock. "Ultimately, it's likely there will be one Musk Inc. at the end," said XPrize Foundation founder Peter Diamandis, an investor in both SpaceX and xAI.
SpaceX plans to use its Starship rocket, capable of launching 200-ton payloads, to deploy orbital data centers.
The company achieved approximately one launch every other day in 2025 using its Falcon rockets, but aims for hourly launches with Starship to support its space-based AI ambitions.
The merger positions SpaceX to compete with Jeff Bezos's Blue Origin, which is developing the New Glenn rocket for similar space infrastructure projects. Both companies vie for NASA's Artemis moon mission contracts amid concerns about SpaceX's development timeline.
Market observers note the timing coincides with Tesla's strategic pivot toward automation and artificial intelligence. Musk announced during Tesla's recent earnings that he would shift the electric vehicle maker's focus toward these technologies, aligning with SpaceX's new direction.
The combined SpaceX-xAI entity now controls rockets, satellite internet, AI development, social media platform X, and the Grok chatbot.
This vertical integration creates both operational synergies and regulatory complexities as Musk continues consolidating his technology empire under a single corporate structure.
