Elon Musk is preparing what would be the largest consolidation of his corporate empire to date: a plan to fold AI specialist xAI into rocket-maker SpaceX and list the combined entity publicly later this year. The deal, signalled by newly registered Nevada shell companies and documents naming SpaceX executives as managers, would stitch together Falcon rockets, the Starlink satellite network, the X social platform and the Grok large language model under one corporate roof.
The legal architecture already in place in Nevada lists Bret Johnsen, SpaceX’s chief financial officer, in managerial roles for the newly formed shells and contemplates converting xAI shares into SpaceX equity. Insiders say the structure would also permit some xAI executives to take cash rather than shares, a retention gambit for talent ahead of a high-stakes initial public offering. Musk’s terse reply on X—“Yeah”—has been read in markets as tacit confirmation; trading moved quickly, with satellite firms and Musk-linked stocks reacting within hours.
Musk’s stated economic rationale is straightforward: terrestrial AI training is constrained by electricity costs and cooling; orbit offers abundant solar energy and a vacuum that could, in theory, simplify heat dissipation. He has publicly argued that deploying compute to space will become cheaper than running massive ground data centres within a two- to three-year horizon. Combining SpaceX’s launch capability with xAI’s models would let him vertically integrate the full stack from launch economics to online inference.
The integration would also reconceive Starlink. Rather than merely a low-orbit communications mesh, Musk envisages thousands of satellites acting as distributed compute nodes—an orbital “cloud” capable of training or running large models closer to data sources. In that scenario, the merged firm could process global data streams in real time, sell low-latency AI services and claim a unique competitive position in both commercial and defence markets.
From a capital-markets perspective the prize is immense. SpaceX has been valued near $800 billion in private markets while xAI attracted a $230 billion valuation late last year; a combined listing could push the headline valuation toward the $1.5–2 trillion range and create what some are calling a once-in-a-generation IPO. That windfall would shore up long-term funding for compute-heavy AI research and give Musk—already a dominant shareholder across several firms—greater leverage in public markets.
Rivals are already planning counters. Amazon and Blue Origin have signalled ambitions for gigawatt-scale orbital data centres, Google is said to be developing a “space AI cloud” prototype and Nvidia-backed projects have put high-end accelerators into orbit. China’s state and commercial actors have similar plans, raising the prospect of an international race to control orbital compute infrastructure and the regulatory frameworks that govern it.
National security questions are immediate and uncomfortable. The Pentagon has shown interest in folding xAI’s language models into defence networks, and SpaceX’s existing Starshield programme already embeds Starlink within U.S. military communications. A merged SpaceX–xAI would concentrate both hardware and advanced AI capabilities in one private entity with growing defence ties—an outcome that will draw scrutiny from regulators and foreign-policy hawks alike.
Sceptics point to technical, economic and governance hurdles. Space is hostile to electronics: radiation, micrometeoroids and debris raise reliability and repairability issues that could negate any energy-efficiency gains. Critics also flag potential conflicts of interest and governance risks—echoing past controversies over Musk’s intra-company transactions—and warn regulators that the financing structure could be a circular mechanism to funnel value between his firms.
Whether this merger succeeds will hinge on demonstrable technical wins, the reaction of capital markets, and how regulators in the United States and abroad characterise the national-security implications. If Musk pulls it off, he could reshape the economics of AI and reframe the strategic value of orbital infrastructure; if he fails, the experiment risks leaving expensive hardware in orbit and prompting a stricter regulatory backlash against converged space–AI conglomerates.