Stock Markets January 29, 2026

SpaceX and xAI Hold Merger Talks as Musk Lines Up a Major Public Offering

Proposed transaction would fold xAI, X and Grok into SpaceX as corporate filings and an informed source outline tentative plans

By Avery Klein
SpaceX and xAI Hold Merger Talks as Musk Lines Up a Major Public Offering

SpaceX and xAI are engaged in discussions about a potential merger ahead of a planned SpaceX initial public offering later this year. Recent Nevada corporate filings and a person briefed on the matter indicate that the transaction would swap xAI shares for SpaceX equity and create new Nevada entities to facilitate the deal. Key elements - including deal value, final structure and timing - remain unresolved.

Key Points

  • SpaceX and xAI are in talks about a merger that would exchange xAI shares for SpaceX stock and unite SpaceX, Starlink, X and Grok under one corporate umbrella; no final agreement has been signed.
  • Two Nevada entities were created on January 21 to help facilitate the transaction; filings list SpaceX and CFO Bret Johnsen among managing members and officers.
  • The deal would occur ahead of a planned SpaceX IPO later this year and follows significant recent funding moves, including xAI’s $20 billion Series E and a $2 billion investment by Tesla.

SpaceX and xAI are in active discussions about a possible merger that would bring Elon Musk’s rocket company together with his artificial intelligence firm and related businesses, according to a person briefed on the matter and two recent corporate filings filed in Nevada.

Under the proposal, holders of xAI shares would receive SpaceX stock in exchange. The arrangement would consolidate Musk’s aerospace operations, his satellite broadband business Starlink, the social media platform X and the Grok chatbot under a single corporate umbrella. The discussions are ongoing and no final agreement has been signed, the person cautioned.


Corporate structures and filings

Two Nevada entities were formed on January 21 to potentially facilitate the transaction, the filings indicate. One is a limited liability company that lists SpaceX and Bret Johnsen, SpaceX’s chief financial officer, as managing members. The other entity lists Johnsen as its sole officer. The filings do not elaborate on the specific purpose of those companies or the precise role they would play in any transaction.

Representatives for Elon Musk, SpaceX and xAI did not respond to requests for comment. Johnsen did not reply to a request for comment.


Terms and current status

According to the person briefed on the matter, some xAI executives may be given the option to accept cash in lieu of SpaceX shares as part of the exchange. Beyond that, the person said the final agreement, if it is reached, remains subject to negotiation and that both the timing and the detailed structure of the deal are still fluid.

The person asked to remain anonymous because the talks are confidential. Reporters were not provided with a valuation, a definitive rationale for the combination, or a firm timeline for an agreement.


Valuation context and IPO plans

SpaceX is already one of the most valuable private companies in the world, last valued at $800 billion following an insider share sale. xAI was valued at $230 billion in November. Public reporting has suggested SpaceX may pursue a public listing this year with a valuation anticipated to exceed $1 trillion, though the timing of any IPO has not been fixed and remains subject to change.


Computing in orbit and the Colossus project

xAI is building out a large-scale supercomputer for AI training known as Colossus in Memphis, Tennessee. Last year, SpaceX agreed to invest $2 billion in xAI as part of that startup’s $5 billion equity fundraising. Musk has publicly argued that placing AI compute in orbit will be the lowest-cost option within the next two to three years, saying in Davos that "the lowest cost place to put AI will be in space. And that will be true within two years, maybe three at the latest."

The vision is to use solar-powered, space-based processing to reduce the cost of generating the large amounts of compute required to run and train complex models such as xAI’s Grok chatbot. Companies including Blue Origin and Google have also announced initiatives or research into space-based communications or data center concepts, highlighting a growing interest in space as a venue for network and compute infrastructure.


Defense contracts and national security ties

Analysts have noted that folding xAI into SpaceX could strengthen the combined company’s position when competing for major Pentagon contracts. xAI holds a contract worth as much as $200 million to supply Grok products to the Department of Defense. Officials have discussed integrating xAI’s language model and the Grok chat platform into military networks as part of broader efforts to accelerate AI adoption across defense systems.

U.S. Defense Secretary Pete Hegseth visited SpaceX’s Starbase development site in Texas earlier this month and said xAI’s language model and Grok will be integrated into military networks under the Pentagon’s "AI acceleration strategy," which aims to enhance the speed and quality of military decision-making and planning.

SpaceX’s Starlink broadband network and its national security variant Starshield already use artificial intelligence in operational tasks such as automating satellite maneuvers. Under a contract with a U.S. intelligence agency, Starshield is constructing a network of hundreds of classified satellites equipped with varied sensors expected to use AI to assist in tracking moving targets on Earth.


Technical and economic uncertainties

Building data centers in space poses a range of technical and economic challenges. While proponents highlight potential energy savings through solar power, industry executives and analysts have questioned whether the projected reductions in energy costs will justify the added expense of adapting hardware and operations for an orbital environment. AI investment and technology evolution are moving quickly, and that pace adds uncertainty to large, long-term infrastructure bets.


History of combining Musk businesses

If completed, the combination would be the latest in a series of transactions that have placed separate Musk-controlled businesses under a single corporate structure. In 2025, Musk integrated the social media platform X into xAI through a share swap that provided xAI with access to the platform’s data and distribution. Earlier, in 2016, Musk used Tesla stock in a transaction to acquire his solar-energy company SolarCity.


Recent fundraising and investments

Earlier this month, xAI completed an upsized Series E funding round, raising $20 billion versus a $15 billion target, at a valuation of $230 billion. Tesla announced on Wednesday that it agreed to invest about $2 billion in xAI.


Company background and next steps

SpaceX was founded in 2002 and disrupted the global launch market with its reusable Falcon rockets, which were central to the rapid deployment of the Starlink satellite broadband network, now composed of thousands of satellites. SpaceX has engaged banks in preparation for an IPO that could occur this year, though no definitive timetable has been announced.

At present, the merger discussions remain preliminary, the newly formed Nevada entities add only a procedural element to the picture, and several important details - including exact deal value, definitive structure, and schedule - have not been disclosed. Those facts leave significant uncertainty about whether and how a merger will ultimately proceed.

Risks

  • Timing, structure and valuation remain unresolved - the merger talks are confidential and subject to change, introducing execution risk for investors and partners across aerospace and AI sectors.
  • Technical and economic uncertainties about space-based data centers could affect the projected cost benefits of orbital AI compute, raising operational and capital expenditure risks for infrastructure and cloud sectors.
  • Defense and national security integrations carry programmatic and regulatory uncertainty, which could influence contracts and revenue streams tied to military AI deployments.

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