According to Reuters and Bloomberg, SpaceX is in early-stage discussions for a potential merger with either xAI or Tesla as it prepares for an Initial Public Offering (IPO) that could value the rocket maker at over $1.5 trillion.
1. The Leading Scenario: SpaceX + xAI
A merger between SpaceX and xAI is currently viewed as the more likely path. This combination would bring Musk’s rockets, the Starlink satellite constellation, the X social media platform, and the Grok AI chatbot under a single corporate umbrella.
- Strategic Rationale: Musk’s vision for “Orbital Computing” involves launching AI data centers into space to harness solar power and reduce cooling costs.
- Nevada Filings: On January 21, 2026, two legal entities—K2 Merger Sub Inc. and K2 Merger Sub 2 LLC—were established in Nevada with SpaceX CFO Bret Johnsen listed as an executive, signaling formal preparations for a tie-up.
- The “Space-AI” Synergy: Integrating xAI with SpaceX would allow Starlink to offer advanced AI-on-the-edge processing for global military and defense networks, a strategy reportedly endorsed by U.S. Defense Secretary Pete Hegseth during a recent visit to SpaceX’s Starbase.
2. The Alternative: SpaceX + Tesla
While some institutional investors are pushing for a merger between SpaceX and Tesla to create the world’s most valuable industrial-tech conglomerate, analysts view this as more complex due to Tesla’s status as a public company.
- The Vision: This merger would combine Tesla’s energy storage (Megapacks) and robotics (Optimus) with SpaceX’s heavy-lift capabilities. Musk has previously discussed using Starship to transport Tesla Optimus robots to established lunar bases.
- The “Physical AI” Pivot: Tesla recently announced it is halting production of the Model S and Model X to convert its Fremont factory for Optimus robot production, describing itself as a “physical AI company” in its Q4 2025 earnings report.
3. Financial Interconnectivity
Recent cross-investments suggest the foundations for a merger have already been laid:
- SpaceX to xAI: SpaceX invested $2 billion in xAI’s Series E round in 2025.
- Tesla to xAI: Tesla disclosed on January 28, 2026, that it also entered an agreement to invest $2 billion in xAI to support collaborations under Master Plan Part IV.
- xAI and X: In March 2025, xAI effectively folded the social media platform X into its own structure to use real-time data for training.
4. IPO Timeline
If the mergers proceed, the resulting entity is expected to target a public listing around June 2026, coinciding with Elon Musk’s 55th birthday. The IPO is projected to be the largest in history, seeking to raise as much as $50 billion at a valuation between $1.2 trillion and $1.5 trillion.
Conclusion: A “Super-Conglomerate”
Whether Musk chooses xAI or Tesla as the primary partner, the goal appears to be the creation of a unified ecosystem where AI (xAI) drives the intelligence, robotics (Tesla) provides the physical form, and space infrastructure (SpaceX) offers the power and global connectivity.
