SpaceX has confirmed it is taking over Elon Musk’s artificial intelligence start-up, xAI, in a deal that further tightens the billionaire’s growing web of interconnected companies.
The space company announced the acquisition by posting a memo from Musk on its website, describing the merger as the creation of an “innovation engine” that brings together AI, rockets, space-based internet, and media under a single structure.
While financial terms were not officially disclosed, a source familiar with the matter said the deal values xAI at $125 billion (£91bn) and SpaceX at $1 trillion, positioning SpaceX as the most valuable private company ever.
Tesla’s $2bn investment and a bigger automation plan
The move follows a recent announcement by Tesla, another Musk-controlled company, which revealed last month that it had invested $2 billion into xAI.
Musk has previously told Tesla investors he sees xAI acting like an “orchestra conductor” for Tesla’s factories, particularly as the company pushes deeper into autonomous robots and automation.
He also signalled a major strategic pivot, saying Tesla would stop producing two vehicle models in favour of building robots one of the most significant shifts in the company’s history.
However, Tesla’s investment in xAI has not been without controversy. Some shareholders objected to the decision, questioning why Tesla resources were being channelled into another Musk venture.
A vote last year reportedly showed more abstentions and opposition votes than approvals.
IPO speculation grows as SpaceX consolidates
The merger is also fuelling fresh speculation that SpaceX may be preparing for a public listing.
SpaceX is reported to be exploring an IPO, and analysts say consolidating xAI into its operations could make the company more attractive to public investors.
Emily Zheng, a senior analyst at Pitchbook, said the acquisition fits a pattern seen among major private firms looking toward the stock market.
She noted that the heavy costs tied to AI including computing power, infrastructure, and energy demands are pushing even the biggest private startups to consider going public.
In his memo, Musk argued that space could eventually solve one of AI’s biggest challenges: energy and scalability.
He said the immediate focus would be launching AI satellites from Earth, but suggested the bigger goal is far more ambitious space-based data centres capable of powering advanced AI at a scale not possible on the ground.
Musk wrote that such capabilities could help fund and enable future expansion projects, including bases on the Moon and an eventual human civilization on Mars.
xAI’s origins and the role of X (formerly Twitter)
xAI initially emerged from Musk’s ownership of X, formerly known as Twitter, after he acquired the platform in 2022.
The company benefited from access to real-time data on the platform, which is valuable for AI training. By spring 2025, xAI had become independently incorporated and gained a higher valuation than X itself.
xAI later acquired X in an all-stock deal, with Musk saying the merger would combine “data, models, compute, distribution and talent.”
Grok under scrutiny
xAI’s flagship product, the Grok chatbot, has faced repeated criticism, particularly over its image generation features.
In recent weeks, both the European Commission and UK media regulator Ofcom opened investigations into X amid concerns that Grok may have been used to generate sexualised images.
xAI has said it introduced new restrictions in January to limit how users can edit images through Grok.
What’s left outside Musk’s main empire?
With xAI now moving under SpaceX, only Neuralink and The Boring Company appear to remain as Musk’s smaller ventures that have not been absorbed into one of his larger companies.
The deal marks yet another step in Musk’s effort to unify his businesses and potentially position SpaceX as a more dominant force not only in space exploration, but in the rapidly expanding global AI race.
