NEW YORK, January 29, 2026, 14:13 (EST)
- SpaceX and xAI are discussing a merger ahead of a planned initial public offering, a source said
- Proposed structure would swap xAI shares for SpaceX shares, with some executives possibly offered cash
- Nevada filings show two new entities formed on Jan. 21 linked to SpaceX CFO Bret Johnsen
Elon Musk’s SpaceX is in talks to merge with his artificial intelligence (AI) company xAI ahead of a planned initial public offering, or IPO, later this year, a person briefed on the matter said. The combination would put SpaceX rockets, Starlink satellites, the X social media platform and xAI’s Grok chatbot under one roof. Reuters
The discussions come as investors brace for what could be one of the biggest listings in years, and as Musk tries to sell a single story that links launch capacity, satellites, data and AI. It also fits his push to move computing into orbit — “data centers”, the server farms that run AI systems, but with rockets doing the heavy lifting. Yahoo
Musk offered a version of that pitch in Davos last week, saying “the lowest cost place to put AI will be in space” within two years, “maybe three at the latest.” He is chasing an AI market dominated by deep-pocketed rivals such as Google, Meta and OpenAI. Investing
Musk, SpaceX and xAI did not respond to requests for comment. Musk runs SpaceX and xAI, which controls X, and is also chief executive at Tesla.
Under the proposed merger, xAI shares would be exchanged for SpaceX shares, the person said. Two entities have been set up in Nevada to facilitate the transaction, the source added, and some xAI executives may get the option to receive cash instead of SpaceX stock.
Reuters could not determine the value of any deal, its primary rationale or when it might be signed. The person briefed on the talks warned that the timing and structure remain fluid and that no final agreement has been reached.
Corporate filings in Nevada show the two entities were set up on Jan. 21. One of them, a limited liability company, lists SpaceX and Bret Johnsen, SpaceX’s chief financial officer, as managing members, while the other lists Johnsen as its only officer.
SpaceX was last valued at about $800 billion in a recent insider share sale, making it the most valuable private company, according to reports. xAI was valued at $230 billion in November, the Wall Street Journal has reported.
SpaceX has lined up banks for an IPO that could come as early as this year, with reports pegging a valuation above $1 trillion. xAI raised $20 billion earlier this month in an upsized Series E funding round, and Tesla said on Wednesday it had agreed to invest about $2 billion in xAI.
Through xAI, Musk is building a large AI-training supercomputer in Memphis, Tennessee, called Colossus. SpaceX agreed last year to invest $2 billion in xAI as part of a $5 billion equity fundraising round, the Wall Street Journal reported at the time.
Musk argues that space-based AI processing could cut energy costs by using solar power. Bezos-backed Blue Origin has announced a high-capacity backbone network of thousands of satellites, while Google is researching space-based data centers with a project it calls Suncatcher.
A merger could also sharpen SpaceX’s pitch for Pentagon business, said Caleb Henry of space research and advisory firm Quilty Analytics, as the U.S. military pushes to expand AI use across its networks. Defense Secretary Pete Hegseth visited SpaceX’s Starbase development site in Texas earlier this month and said Grok would be integrated into military networks as part of the Pentagon’s “AI acceleration strategy.”
xAI has a contract worth as much as $200 million to provide Grok products to the Pentagon. Starlink and its national security variant Starshield already use AI for tasks such as automated satellite maneuvers, and Starshield is building a network of classified satellites expected to use AI to help track targets on Earth.
But a core bet — putting data centers in space — remains risky and expensive, especially as AI spending shifts fast and often unpredictably. Analysts and some industry executives have questioned whether power savings would justify the cost of designing, launching and maintaining hardware in orbit, and the source said the deal could still change shape or slip.
Musk has tried to fuse his businesses before. In 2025, he folded X into xAI in a share swap, and in 2016 he used Tesla stock to buy his solar firm SolarCity.
