Inside Musk’s Biggest Tech Play Yet as SpaceX Acquires xAI to Build a $1.25 Trillion Empire

2 February 2026

In a deal that has stunned the tech world, Elon Musk confirmed that his spacecraft and satellite operator SpaceX has acquired his artificial-intelligence startup xAI, in what many observers are calling the most ambitious merger in his corporate constellation yet. The transaction collapses two of the most powerful pieces of Musk’s business empire into a single private company valued at roughly $1.25 trillion, positioning the combined entity at the forefront of both space exploration and the rapidly evolving AI frontier. The deal was structured as an all-stock transaction, and according to industry insiders it brings xAI’s AI capabilities and SpaceX’s vast launch and satellite infrastructure into one organisation ahead of an expected initial public offering for SpaceX later this year.

xAI was founded in 2023 by Musk and has gained recognition for its Grok chatbot and other AI models as it vies with competitors in a crowded field of generative artificial intelligence developers. The acquisition works to fold that expertise into SpaceX’s offerings, opening up the possibility of what Musk describes as space-based artificial-intelligence computing. SpaceX has suggested that moving AI data centres and compute power off planet could circumvent the enormous energy and cooling limitations posed by massive AI infrastructure on Earth, potentially enabling a new class of orbital data centre satellites powered by solar energy.

Industry analysts note that the merger is as much strategic as it is technological. SpaceX’s launch capacity and its Starlink satellite network, already serving millions of internet customers globally, provide a unique platform for delivering and hosting distributed compute resources in orbit. Combining these assets with xAI’s models and talent pool might reshape traditional boundaries between aerospace and artificial-intelligence industries. The merged entity is expected to tap into growing demand for both space services and AI infrastructure, creating a narrative of integrated innovation that Musk believes will resonate with future investors.

The scale of the deal represents a striking escalation in Musk’s long-term ambitions. SpaceX, valued at around $1 trillion in private markets, was already one of the most valuable private companies on the planet. xAI’s valuation at approximately $250 billion before the acquisition reflects the booming investor interest in AI startups capable of building next-generation models and services. By merging the two, Musk consolidates his portfolio into a single powerhouse that spans rocketry, satellite internet, generative AI, and potentially space-based data centre infrastructure.

Critics and sceptics point to the risks inherent in combining two ventures with very different operational challenges. SpaceX’s missions to build and reuse massive rockets to support lunar and Martian ambitions remain capital-intensive and complex. Meanwhile, xAI, despite its high profile, has faced internal upheaval, including notable departures of key employees in early 2026 as it restructured following the merger. Some industry watchers question whether the cultural and technical integration of AI and aerospace operations can deliver on Musk’s lofty vision without significant execution challenges.

Supporters of the move argue that the unification could unlock synergies that traditional corporate structures struggle to achieve. The combination of hardware scale, orbital infrastructure and cutting-edge software driven by artificial intelligence could create competitive advantages in areas ranging from autonomous satellite operations to AI-enhanced space exploration. Moreover, as SpaceX moves toward its planned IPO, offering investors a single, integrated vision of future technology might bolster its appeal and justify its lofty valuation.

As the tech world digests the implications of the SpaceX-xAI acquisition, one thing is clear: Elon Musk’s pursuit of the future extends far beyond Earth’s surface. By binding AI and space in a single enterprise, he is staking a claim to a vision of innovation that could influence both industries in the years ahead. Observers will be watching closely as the company charts its next moves, from orbital data infrastructure plans to preparations for life as one of the most valuable public companies the world has ever seen.