SpaceX to acquire Musk’s AI firm xAI in major consolidation move

SpaceX is set to take over xAI, Elon Musk’s artificial intelligence start-up, in a move that further consolidates the billionaire’s technology empire and sharpens SpaceX’s positioning ahead of a possible public listing.

The rocket maker confirmed the acquisition in a memo from Musk published on its website, saying the merger would create an “innovation engine” spanning artificial intelligence, launch systems, space-based internet and media. Financial terms were not disclosed.

However, a source familiar with the transaction said the deal values xAI at $125bn (£91bn) and SpaceX at about $1tn, a valuation that would make SpaceX the most valuable private company in the world, Reuters reported.

The acquisition follows a $2bn investment by Tesla into xAI announced last month. At the time, Musk told Tesla investors that xAI could act as an “orchestra conductor” for Tesla factories using autonomous robots, according to the Wall Street Journal. Tesla has also signalled a strategic pivot towards robotics, including plans to stop manufacturing two vehicle models.

The Tesla investment was contentious. Shareholder filings show abstentions and votes against the proposal outnumbered those in favour in a vote last year, highlighting growing unease among investors about cross-investments between Musk-controlled companies.

xAI is best known for Grok, its conversational AI chatbot. The company originated as part of X, formerly Twitter, after Musk acquired the social media platform in 2022 and leveraged its real-time data for AI training. By spring 2025, xAI had been spun out as an independent entity and secured a higher valuation than X, Reuters reported.

In a separate transaction, xAI later acquired X in an all-stock deal, with Musk saying the combination would unify “data, models, compute, distribution and talent”.

The SpaceX memo suggested the merger has longer-term strategic ambitions. Musk said space would ultimately provide the energy and scale required for advanced AI systems. “In the long term, space-based AI is obviously the only way to scale,” he wrote, adding that launching AI satellites would be an immediate priority.

Analysts see the consolidation as a prelude to a stock market debut. Emily Zheng, a senior analyst at PitchBook, said the transaction bears the hallmarks of IPO preparation. “The sheer cost of compute, infrastructure and energy is why we are seeing some of venture’s most valuable companies prepare to go public,” she said, according to Bloomberg. “Consolidating assets allows SpaceX to present a differentiated, capital-efficient growth story.”

Regulatory scrutiny remains a risk. Grok has faced criticism over its image-generation capabilities, prompting investigations by the European Commission and UK regulator Ofcom into whether it was used to create sexualised images, Reuters reported. xAI said in January it had introduced restrictions limiting image editing.

With xAI now folded into SpaceX, Neuralink and The Boring Company appear to be the only remaining Musk ventures not absorbed into his larger corporate platforms.

Looking ahead, the deal underscores Musk’s strategy of integrating AI with capital-intensive infrastructure, even as investors and regulators scrutinise the concentration of power—and risk—across his businesses.