SpaceX-xAI merger talks advance as Musk reshapes corporate structure
SpaceX is in advanced discussions to combine with xAI, Elon Musk's AI company, according to people familiar with the matter. The companies have informed some investors of the potential deal, which would represent a significant consolidation of Musk's business interests.
The proposed merger comes as xAI faces mounting capital requirements for computing infrastructure and model development. By combining with SpaceX—valued at over $350 billion in recent private transactions—xAI would gain access to both capital and potential synergies around computing resources and satellite connectivity.
The enterprise angle: This isn't just a financial restructuring. xAI's Grok model is already integrated into X (formerly Twitter) and reportedly being considered for Tesla vehicles. A SpaceX merger would create a vertically integrated AI-compute-connectivity stack that could compete directly with hyperscaler offerings, particularly for edge and satellite-connected use cases.
The timing matters. xAI has been burning capital building out data center capacity to compete with OpenAI, Anthropic, and Google. Meanwhile, SpaceX's Starlink network represents a unique distribution channel for AI services in remote or mobility applications—scenarios where terrestrial cloud connections fall short.
Regulatory complications: The merger would intensify existing regulatory scrutiny. xAI's Grok chatbot is currently under investigation by EU regulators for generating sexualized deepfakes, with potential Digital Services Act fines. The UK's Ofcom has also opened a probe that could result in service bans. Indonesia temporarily blocked Grok access in January.
SpaceX, meanwhile, holds critical government contracts with NASA and the Department of Defense. Combining it with an AI company facing active regulatory investigations creates obvious conflict-of-interest questions, particularly given Musk's government advisory role.
What to watch: How SpaceX investors—including Fidelity, Google, and sovereign wealth funds—respond to taking on xAI's regulatory exposure. Whether Tesla becomes part of a broader consolidation, as some reporting suggests. And how regulators in the US, EU, and APAC jurisdictions view the competitive implications of a Musk-controlled AI-compute-connectivity monopoly.
The deal structure and timing remain unclear. SpaceX has previously discussed potential IPO plans, which this merger could complicate or accelerate depending on capital needs.