Elon Musk explores SpaceX-xAI merger ahead of IPO, report says

• SpaceX was valued at roughly $800 billion in a recent insider transaction, making this potentially Musk's largest corporate consolidation after previous moves like folding X into xAI in 2025 and Tesla's 2016 SolarCity acquisition
• xAI already holds a Pentagon contract valued at up to $200 million to provide Grok AI products to the Defense Department, with integration planned as part of the military's 'AI acceleration strategy'
• Two Nevada entities were established on January 21 to facilitate the transaction, with SpaceX CFO Bret Johnsen listed as managing member, though regulatory approval and defense contracting reviews may delay the deal

Summary: SpaceX-xAI Merger Discussions Ahead of IPO

Key Development: Elon Musk's SpaceX and xAI are exploring a merger ahead of SpaceX's anticipated IPO later in 2026, according to an exclusive report. Discussions remain fluid with no final agreement on valuation, timing, or structure.

Strategic Rationale: The merger centers on SpaceX's ambitious plan to launch orbital data centers for AI processing. Musk stated at Davos that space-based AI computing will become cost-competitive with ground facilities within two to three years. The combination would integrate xAI's Grok chatbot with SpaceX's Starlink satellite network and launch capabilities, enabling low-latency, solar-powered AI processing in orbit.

Defense Implications: xAI holds a Pentagon contract worth up to $200 million to provide Grok products to the Defense Department. Defense Secretary Pete Hegseth recently announced Grok's integration into Pentagon networks as part of the military's "AI acceleration strategy."

Financial Details:

• SpaceX valued at approximately $800 billion in recent insider transactions
• Two Nevada entities established January 21 to facilitate the deal
• SpaceX CFO Bret Johnsen listed as managing member
• Deal structure would have xAI merge into SpaceX

Historical Context: This follows Musk's 2025 consolidation of X into xAI and his 2016 Tesla-SolarCity merger, though this deal would be substantially larger in scope.

Market Implications: The merger could fundamentally reshape SpaceX's IPO narrative and revenue potential by combining aerospace infrastructure with AI computing. However, questions remain whether this represents genuine cost reduction or primarily financial engineering. Regulatory approval and defense contracting reviews may delay proceedings.