Elon Musk merges SpaceX with xAI in record-setting deal valuing new company at $1.25-trillion
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Elon Musk attends the Viva Technology conference in Paris, France. The tech leader is looking to unify his AI and space ambitions ahead of an anticipated SpaceX IPO.GONZALO FUENTES/Reuters
Elon Musk said on Monday that SpaceX has acquired his artificial-intelligence startup xAI in a record-setting deal that unifies Musk’s AI and space ambitions by combining the rocket-and-satellite company with the maker of the Grok chatbot.
The deal, first reported by Reuters last week, represents one of the most ambitious tie-ups in the technology sector yet, combining a space-and-defence contractor with a fast-growing AI developer whose costs are largely driven by chips, data centres and energy. It could also bolster SpaceX’s data-centre ambitions as Musk competes with rivals like Alphabet’s Google GOOGL-Q, Meta META-Q, Amazon-backed Anthropic and OpenAI in the AI sector.
The transaction values SpaceX at US$1-trillion and xAI at US$250-billion, according to a person familiar with the matter. Investors in xAI will receive 0.1433 shares of SpaceX for every share of xAI as part of the acquisition, this person said. Some xAI executives may also opt for cash instead of SpaceX stock at US$75.46 per share, the person said.
“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.
Deal breaks record for world’s top M&A
The purchase of xAI sets a new record for the world’s largest M&A deal, a distinction held for more than 25 years when Vodafone bought Germany’s Mannesmann in a hostile takeover valued at US$203-billion in 2000, according to data compiled by LSEG.
The combined company of SpaceX and xAI is expected to price shares at about US$527 each, another person familiar with the matter said. SpaceX was already the world’s most valuable privately held company, last valued at US$800-billion in a recent insider share sale. XAI was last valued at US$230-billion in November, according to the Wall Street Journal. The merger comes as the space company plans a blockbuster public offering this year that could value it at over US$1.5-trillion, two people familiar with the matter said.
SpaceX, xAI and Musk did not immediately respond to requests for comment.
The deal further consolidates Musk’s far-flung business empire and fortunes into a tighter, mutually reinforcing ecosystem – what some investors and analysts informally call the “Muskonomy” – which already includes Tesla, brain-chip maker Neuralink and tunnel firm the Boring Company.
“Starlink was already a cash flow engine and now it adds an AI revenue layer on top while also becoming a distribution surface for AI services and data,” said Ali Javaheri, PitchBook Senior Emerging Spaces Analyst.
“With policy changes that allow certain customer data to be used for model training and the prospect of orbital data centres, SpaceX is positioning itself as an integrated infrastructure platform that can serve commercial and government use cases, which is a much stronger narrative heading into a public offering.”
Deal could draw regulatory scrutiny
The world’s richest man has a history of merging his ventures together. Musk folded social media platform X into xAI through a share swap last year, giving the AI startup access to the platform’s data and distribution. In 2016, he used Tesla’s TSLA-Q stock to buy his solar-energy company SolarCity.
The agreement could draw scrutiny from regulators and investors over governance, valuation and conflicts of interest given Musk’s overlapping leadership roles across multiple firms, as well as the potential movement of engineers, proprietary technology and contracts between entities.
SpaceX also holds billions of dollars in federal contracts with NASA, the Department of Defense and intelligence agencies, which all have some authority to review M&A transactions for national security and other risks.
