On February 2nd, a corporate filing in Nevada finalized the merger of SpaceX and xAI in a $1.25 trillion all-stock transaction. SpaceX entered the deal valued at $800 billion based on its most recent secondary share offering, while xAI carried a $230 billion valuation after completing a $20 billion funding round in January. Public records list Space Exploration Technologies Corp. as the “managing member” of X.AI Holdings, establishing the new governance structure.
Elon Musk announced the consolidation in a blog post on Monday, describing the company as “the most ambitious, vertically-integrated innovation engine on (and off) Earth,” bringing together AI development, rocket systems, space-based internet, and the X social media platform that xAI acquired last year.
The merger links directly to Musk’s technical plan. SpaceX recently petitioned the Federal Communications Commission for authorization to deploy up to one million satellites to support what he calls “orbital data centers,” a constellation intended to process AI workloads in low-Earth orbit. In his announcement, Musk wrote, “My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space,” citing terrestrial energy limits for large-scale machine learning. The proposal builds on SpaceX’s Starlink network, which already operates more than 9,000 satellites and serves approximately 9 million customers worldwide. xAI contributes its Grok platform and data processing capabilities to this space-to-AI pipeline.
Financial backing for the deal is extensive. xAI’s latest funding round included Nvidia and Cisco Investments alongside Valor Equity Partners, Stepstone Group, Fidelity, Qatar Investment Authority, Abu Dhabi’s MGX, and Baron Capital Group. Tesla committed $2 billion to xAI days before the merger. SpaceX generated an estimated $8 billion in profit on $15 to $16 billion in revenue in 2025, strengthening its position ahead of a possible public offering. Bloomberg has reported that the $1.25 trillion valuation signals preparation for an IPO in the coming months.
For users, Starlink customers could receive AI-powered features integrated directly into satellite internet services, while Grok users might benefit from orbital processing with faster responses and more advanced capabilities. The transaction concentrates control over X, Starlink, SpaceX, xAI, and Tesla under Musk’s ecosystem, spanning social media, satellite connectivity, space transport, and artificial intelligence. Businesses reliant on cloud infrastructure could gain a space-based alternative, though the model still faces unresolved hurdles involving power generation, heat dissipation, and data transmission from orbit, none proven at a commercial scale.
The U.S. Department of Defense has begun integrating xAI’s Grok platform into Pentagon operations to analyze military intelligence databases alongside systems such as Google’s Gemini. This use intersects with SpaceX’s role as a defense contractor holding tens of billions of dollars in federal agreements. Neither SpaceX nor xAI responded to requests for comment on possible review by the Committee on Foreign Investment in the United States, which could examine the deal because of its ties to critical space infrastructure and sensitive AI capabilities.
xAI also faces investigations in multiple jurisdictions after Grok was found capable of generating inappropriate content, including sexualized images of children and non-consensual intimate imagery. These cases continue as the company pursues orbital computing and expands its commercial and government operations.
The deal establishes a single organization spanning terrestrial infrastructure and low-Earth orbit. SpaceX-xAI now unites rockets, satellite networks, live social data from X, and AI development under one corporate roof. Musk expects orbital AI computing to be feasible within two to three years, while the engineering problems involved in operating large-scale data centers in space have yet to be resolved.
