Elon Musk's rocket company SpaceX announced Monday that it had acquired his artificial intelligence startup xAI, consolidating two of the world's most valuable private companies into a single entity valued at $1.25 trillion.

The all-stock deal assigns SpaceX a valuation of $1 trillion and xAI a valuation of $250 billion. Combined shares are expected to price at $526.59 each. Public records filed with the Nevada Secretary of State indicate the transaction was completed on February 2, with Space Exploration Technologies Corp. listed as the "managing member" of X.AI Holdings.

"SpaceX has acquired xAI to form the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world's foremost real-time information and free speech platform," Musk wrote in a memo posted to SpaceX's website.

The company is still expected to pursue an initial public offering later this year that could raise as much as $50 billion—what would be the largest IPO on record, surpassing Saudi Aramco's $29 billion listing in 2019.

A Bet on Data Centers in Space

Musk framed the merger as a necessary step toward building AI infrastructure in orbit, an idea he has promoted with increasing frequency in recent months.

"Current advances in AI are dependent on large terrestrial data centers, which require immense amounts of power and cooling," Musk wrote. "Global electricity demand for AI simply cannot be met with terrestrial solutions, even in the near term, without imposing hardship on communities and the environment."

He estimated that within two to three years, the cheapest way to run AI computations will be in space. Solar-powered satellites, he argued, could operate with minimal maintenance costs while avoiding the environmental footprint of ground-based facilities.

"It's always sunny in space!" Musk wrote.

On Friday, SpaceX filed with the Federal Communications Commission seeking permission to launch up to one million satellites as part of what it called "orbital data centers." The filing said the network would help "accommodate the explosive growth of data demands driven by AI."

Whether the technology is viable remains an open question. SpaceX will need regulatory approval for such a fleet and has yet to deploy an operational payload during test flights of its Starship rocket system, which has been in development since 2023.

Other companies have explored similar concepts. Google last year revealed a research project called Suncatcher that would equip solar-powered satellites with AI computer chips. But Microsoft, one of the largest builders of data centers in the world, has expressed skepticism.

"I'll be surprised if people move from land to low-Earth-orbit," Microsoft President Brad Smith said last month.

Two Companies, Different Balance Sheets

The merger brings together a mature, profitable business and one that is hemorrhaging cash.

SpaceX generated an estimated $8 billion in profit on revenue of $15 billion to $16 billion in 2025. The company operates the Starlink satellite internet service, which now has more than 9,000 satellites in orbit and roughly 9 million customers. Revenue from Starlink has begun to outpace SpaceX's launch business.

SpaceX is the only American company capable of routinely sending astronauts to and from the International Space Station. It holds tens of billions of dollars in contracts with NASA and the Department of Defense.

xAI, by contrast, is burning through approximately $1 billion per month as it races to compete with OpenAI, Google and Anthropic in the development of large language models. The company raised $20 billion at a $230 billion valuation earlier this year, with investors including Nvidia, Cisco Investments, Fidelity, the Qatar Investment Authority, Abu Dhabi's MGX, and Baron Capital Group.

Last week, Tesla—also run by Musk—disclosed a $2 billion investment in xAI preferred stock.

xAI owns and operates the social media platform X, formerly known as Twitter, which Musk acquired in 2022 for $44 billion. He merged it with xAI last year in an all-stock transaction that valued the combined entity at $113 billion.

The company also operates Grok, a chatbot that has drawn regulatory scrutiny in multiple jurisdictions after its AI tools enabled users to generate sexualized images of children and nonconsensual intimate images of adults, predominantly women. In January, the Department of Defense began using Grok within the Pentagon, allowing information from military intelligence databases to be analyzed through the system.

A Pattern of Consolidation

The deal continues Musk's practice of intertwining his various business ventures. Tesla bought his solar energy company SolarCity a decade ago. xAI absorbed X last year. Now SpaceX absorbs them both.

The arrangement pools capital, engineering talent and computing resources across Musk's empire—but it also blurs corporate boundaries in ways that have previously drawn scrutiny from shareholders and regulators.

SpaceX did not respond to questions about whether the merger would require review by the Committee on Foreign Investment in the United States, given xAI's foreign investors and SpaceX's role as a defense contractor.

Musk is also the CEO of Tesla, the electric vehicle maker that remains the primary source of his personal wealth, along with brain-chip startup Neuralink and tunnel-digging firm The Boring Company.

At the World Economic Forum in Davos last month, he spoke of humanity as "a tiny candle of consciousness that could easily go out," and said colonizing other planets was necessary to ensure survival in the event of catastrophe on Earth.

The SpaceX-xAI merger, he suggested, moves that ambition closer to reality.

What Comes Next

The combined company is now more than double the valuation of its nearest private competitor, OpenAI, which was last valued at roughly $500 billion.

SpaceX's IPO timeline remains unclear. The Financial Times reported last week that Musk had floated holding the offering in mid-June to coincide with a rare planetary alignment and his 55th birthday. Major banks including Goldman Sachs, JPMorgan Chase, Morgan Stanley and Bank of America have been lined up for lead roles in the listing.

How the addition of xAI—with its heavy cash burn and regulatory complications—will affect investor appetite remains to be seen.

Kimberly Burke, director of government affairs at research firm Quilty Space, said the acquisition appeared designed to give SpaceX an AI-fueled narrative heading into public markets.

"This is how Musk manages risk for private investors," she said.