SpaceX has officially acquired Elon Musk's artificial intelligence startup xAI in the largest merger of all time, creating a combined entity valued at $1.25 trillion.
The all-stock transaction, announced on February 2, 2026, values SpaceX at $1 trillion and xAI at $250 billion. The merger positions the combined company for what could be one of the largest IPOs in history later this year.
SpaceX Acquires xAI: Space-Based Data Centers Drive the Vision
Musk's primary rationale for the merger centers on building orbital data centers – a concept he has become fixated on in recent months.
In his announcement memo, Musk argued that global electricity demand for AI cannot be met with terrestrial solutions alone without imposing hardship on communities.
He estimates that within two to three years, the lowest cost way to generate AI compute will be in space.
SpaceX has already asked the FCC for authorization to launch up to one million satellites as part of its orbital data center initiative.
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Financial Stakes and Post-Merger Challenges
The merger brings significant financial complexity. xAI is currently burning approximately $1 billion per month, while SpaceX generates most of its revenue from launching its own Starlink satellites, with an estimated $8 billion profit on $15-16 billion revenue in 2025.
Musk's bankers are working on a financing plan to reduce an $18 billion debt stack accumulated through the Twitter buyout and xAI operations.
Post-merger reorganization is underway, with Musk acknowledging that the process required parting ways with some employees.
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