Why did Elon Musk merge SpaceX and xAI?

On 2 February 2026, SpaceX acquired xAI. The former, Elon Musk’s leading aerospace manufacturing venture, and the latter, his company behind the divisive AI chatbot Grok, make good bedfellows. Not only does this consolidation of the Muskverse create the world's most valuable private company ($1.25 trillion), it will support new opportunities for integrating AI capabilities with space hardware.

So, how does this square with Musk’s mission to “extend consciousness to the stars”? How likely is a Tesla-SpaceX merger? And what do shareholders think about the move?

Rockets and AI

In classic Musk style, the SpaceX-xAI merger is big, bold, and ambitious. The new conglomerate, it’s predicted, will be floated on the stock market in late June 2026 – just in time for Musk’s birthday, when a rare conjunction of Jupiter and Venus is expected. It’s slated to be the largest IPO in history.

Big questions hang over the flotation: how good will this be for SpaceX’s non-Musk shareholders? How technologically viable are rockets and AI? In the broligarchic playground, speculation is fierce and details are thin.

Were Musk himself asked to provide some rationale, he would point to the astronomical potential in moving data centres into space. At first glance, the logic is grounded. Earth-based data centres are crude, dirty, and hungry for energy. In the vacuum of space – with no atmosphere to interrupt the infinite cascade of solar rays – satellites could sop up the sun’s energy and beam it back to Earth. Experts have claimed, however, that this vision would only be viable if planet-wide constellations of orbiting solar farms were realised.

Other logistical issues abound, including connection quality, unpredictable solar winds, and – worst of all – maintenance costs. When a data centre trips up today, engineers can quickly get in to patch things over. With data centres circling Earth, however, shipping parts out of the atmosphere becomes complex and expensive. To bring down the cost, big innovations will be needed around how data centres are built.

If Musk can pull it off, his satellite data centres could contribute 100 gigawatts of AI capacity every year. That would be transformative, given global data centre capacity today stands at 59 gigawatts.

Bringing shareholders into orbit

If the planned flotation is to be the birthday gift Musk hopes for, he will need to make his argument powerful and convincing.

For its part, xAI is engaged in an expensive battle with rivals – including Meta, Amazon, Microsoft, and Google – to build out AI infrastructure. In 2025, xAI stumped up $13 billion for such projects, Bloomberg says, despite lacking the cash-generating capabilities of its competitors. Many investors believe this is the driver behind the merger: enabling SpaceX to underwrite xAI’s eye-wateringly large R&D commitments. For xAI shareholders, the move means access to capital and investors; for others, it raises questions around if and how the AI bubble will start to deliver returns.

But the challenges don’t just pertain to the company’s new financial profile. Bringing xAI into the fold is fraught with reputational complexity, given the controversy around extremism on X, formerly Twitter, and the alleged production of child pornography by Grok.

When the merger was first announced, the market response was jittery. Investor faith is wobbling, and spending on such large scales – in the absence of proven returns – is drawing comparisons to the dotcom crash of the early noughties. The recent exposure trim-off sent ripples across the entire tech sector, including crypto. Bitcoin fell to $60,000 on 6 February, the lowest since Trump took office, while Amazon shares fell by 9%.

For now, Musk’s argument seems to be prevailing over investors’ concerns for the future. His merger transplanted the most advanced AI brain into the most advanced hardware body on the planet. Now, SpaceX-xAI controls the entire stack.

A Tesla-SpaceX merger

With a successful merger in Musk’s rearview mirror, speculation about a potential Tesla-SpaceX deal is rife. It would create a one-stop-shop for those interested in buying into the Muskverse.

No doubt, SpaceX is already a revenue machine. According to Reuters, the aerospace manufacturer made $8 billion in profit on $15 billion of revenue in 2025. It was primarily generated by deploying reusable rockets which launched satellites into space and restocked the International Space Station.

With a 44% ownership of SpaceX and 17% of Tesla, Musk has the heft and the ambition to make it happen. Total consolidation of his empire would create a multi-trillion-dollar entity – with the power to set the course of industry across AI, data centres, solar energy, communications, internet access, aerospace engineering, and electric vehicles. It would grant Musk more power than some nation states. In some areas, he already has it.   

Moonshot capitalism: The countdown

Despite the skittishness, results posted by the tech sector seem to be holding fast – buoyed by bombastic moves from the broligarchy, above-forecast revenues, powerful capital reserves to eat up the losses, and Trump’s pro-tech stance.

But can the growth to infinity go on forever? Ultimately, this market is one – for better or worse – underpinned by belief. It is Musk’s ability to generate a premium, from his aura alone, that continues to provide the rocket fuel for his ventures. Should he deliver, the world will benefit from a greener way to power the AI revolution. Should he fail, the sky could come crashing down.