Key Takeaways:

SpaceX bought xAI, combine Elon Musk’s rocket company and artificial intelligence startup in one entity..

This deal creates an entity that is worth more than $1.25 trillion, combining SpaceX’s hardware with xAI’s “Grok” intelligence.

This merger prepares for a massive IPO later this year and they also plan to launch solar-powered data centers into orbit.

SpaceX has officially acquired xAI, this entity will be the largest combination in Elon Musk’s business empire, since Tesla bought SolarCity in 2016. Companies confirmed the largest deal that makes the world’s most powerful rockets into one of the fastest-growing AI models.

Details of the Mega-Deal

This is an all-stock transaction as Musk said. Shareholders of xAI will exchange their shares for equity in SpaceX. When most investors are getting stock, a few CEOs at xAI will have the option to take cash payouts.

If Musk wants to make this complex deal legal, lawyers set up two entities in Nevada. This structure is designed to make the merger quickly. It also serves a bigger purpose: changing the capitalization table as quickly as possible for SpaceX’s Initial Public Offering (IPO), which is expected to happen in the second half of 2026. Analysts predict that when this combined company goes public, it could be valued at $1.5 trillion.

This move happens after a year of tight financial cooperation. SpaceX invested $2 billion in xAI in 2025, and Tesla added more than $2 billion  last week. It shows that Musk’s companies were already moving toward full range.

SpaceX has officially acquired xAI

Why Do They Put AI in Space?

The biggest question for many observers is: Why does a rocket company need an AI company? The answer could be called “Orbital Compute.”

SpaceX plans to use enormous Starships that contain floating data into orbit. On Earth, supercomputers like xAI’s “Colossus” in Memphis consume amounts of electricity, they also require expensive cooling systems. In space, solar power is limitless, and the cold vacuum  can provide free cooling for xAI.

This strategy allows SpaceX to compete with Google’s rumored “Project Suncatcher.” They will use the technology from xAI to improve SpaceX’s existing products. The Grok AI model will be fused into Starlink to handle millions of users’ support. Additionally, this AI will help manage the autonomous operations of the Optimus robots.

A National Security Powerhouse

Quilty Analytics, a firm that studies in the space industry, noted that this merger strengthens Musk’s relationship with the Pentagon.

xAI signed a $200 million contract to provide Grok for defense purposes. When they combine this software with SpaceX’s satellite network (Starshield), the new entity becomes an all-in-one for national security. It offers the military both the eyes of the sky (satellites) and the brains to analyze the data (AI), from a single American provider.

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