SpaceX officially acquires xAI. Here's how Elon Musk justifies the move.

By William Gavin

Musk says the newest merger of companies he owns is necessary to create 'a sentient sun to understand the universe'

SpaceX and xAI are combining, in the latest merger between Elon Musk-affiliated entities.

Elon Musk's xAI has been acquired by SpaceX, bringing his artificial-intelligence startup under the same roof as his rocket maker.

In a memo to staff published on SpaceX's website late Monday, Musk said the merger is necessary to create the "most ambitious, vertically-integrated innovation engine." The merger combines SpaceX, which develops and launches rockets; Starlink, a satellite-internet business; xAI, which develops the large-language model Grok; and X, the social-media platform.

"This marks not just the next chapter, but the next book in SpaceX and xAI's mission: scaling to make a sentient sun to understand the universe and extend the light of consciousness to the stars!" Musk said in a statement.

The move is Musk's second in less than a year to help consolidate his empire, which also includes the brain-chip interface startup Neuralink, tunneling firm The Boring Co. and Tesla (TSLA), the publicly traded electric-vehicle maker. In March 2025, xAI acquired X in a deal that valued the AI company at $80 billion and X at $33 billion.

SpaceX's acquisition ties Musk's cash-burning xAI with a space-technology business that generated about $8 billion in profit last year, according to Reuters. SpaceX generated an estimated $15 billion in revenue in 2025.

Terms of the xAI acquisition were not disclosed. The combined entity is expected to price shares at about $527 each with a $1.25 trillion market capitalization, according to Bloomberg News, which cited people familiar with the matter.

SpaceX was valued at $800 billion in December 2025 following a secondary stock sale and was previously pursuing an initial public offering at a $1.5 trillion valuation. XAI was reportedly worth at least $230 billion after raising $20 billion last month.

Tesla was also under consideration for a merger with SpaceX, according to Bloomberg. Last week, Tesla disclosed that it plans to invest $2 billion in xAI.

SpaceX is expected to use cash raised from a public listing to help develop solar-powered orbital data centers, which are viewed as a potential solution to the energy crunch driven by AI data centers. Musk has been a major proponent of that idea, which has also been explored by startups like Nvidia (NVDA)-backed Starcloud, as well as Alphabet (GOOG) (GOOGL) and Blue Origin.

Although an ambitious idea, the technology involved is untested and the economics don't make sense, at least for now. But Musk thinks that space-based data centers will be the cheapest way to generate AI computing power within three years.

"By directly harnessing near-constant solar power with little operating or maintenance costs, these satellites will transform our ability to scale compute," Musk wrote.

Read: The 'space economy' is booming. Here's where most of the money is going.

In his memo, Musk advertised big plans for SpaceX and Starship, the mega-rocket at the center of his plans to colonize Mars and launch dozens of satellites at a time. He said that Starship vehicles will eventually be capable of delivering 200 tons per flight and launch every hour.

SpaceX is still preparing its third, and latest, version of Starship, which is set to have its first launch test in March. That vehicle is expected to begin launching Starlink's next-generation satellites, which will be much more powerful than the current spacecraft.

On Friday, SpaceX asked U.S. regulators for approval to launch up to 1 million satellites as orbital data centers, which would be a herculean effort. Less than 10,000 Starlink satellites are currently in orbit.

That constellation would be the "first step towards becoming a Kardashev II-level civilization, one that can harness the sun's full power, while supporting AI-driven applications for billions of people today and ensuring humanity's multi-planetary future," Musk said.

-William Gavin

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02-02-26 1750ET