Elon Musk is reportedly considering a major consolidation of his business empire by merging SpaceX with either his artificial intelligence startup xAI or electric vehicle manufacturer Tesla. This strategic move comes just months before SpaceX's highly anticipated public debut, which could become the largest stock market listing in history with a potential valuation of $1.5 trillion.
The Merger Contemplation: Reshaping Musk's Business Landscape
According to reports from The Wall Street Journal, Reuters, and Bloomberg, discussions about potential mergers are underway, though no final decisions have been made. The planning appears to be more than theoretical, as two "merger sub" entities were registered in Nevada on January 21, with SpaceX Chief Financial Officer Bret Johnsen listed as an officer. This development suggests serious consideration is being given to restructuring Musk's already intertwined companies.
The xAI Scenario: Building AI Infrastructure in Orbit
Merging SpaceX with xAI would advance Musk's ambitious vision of launching data centers into space. At the recent World Economic Forum in Davos, Musk declared that "the lowest-cost place to put AI will be space" within two or three years, powered by solar energy and free from Earth's energy grid constraints. xAI, valued at $230 billion in November, owns the Grok chatbot and X social media platform.
Creating a Vertically Integrated Powerhouse
A SpaceX-xAI combination would create a vertically integrated operation spanning rockets, satellite internet through Starlink, AI development, and social media distribution. According to Reuters, xAI shares would convert to SpaceX stock in such a merger, though some executives might receive cash instead. This deal could also strengthen SpaceX's relationships with the Pentagon, as Defense Secretary Pete Hegseth recently visited SpaceX's Texas facility and announced plans to integrate Grok into military networks. xAI already has contracts worth up to $200 million with the Department of Defense.
The Tesla Alternative: Energy Meets Space Exploration
Bloomberg reports that some investors are advocating for a SpaceX-Tesla combination instead. The logic behind this proposal is straightforward: Tesla manufactures the energy storage systems that could help SpaceX run those orbital data centers on solar power. There's significant overlap in Musk's vision for both companies, as he has discussed using Starship rockets to transport Tesla's Optimus humanoid robots to the moon and eventually Mars.
Strategic Alignment and Manufacturing Pivot
Tesla recently announced it's converting its Fremont factory from producing Model S and Model X vehicles to manufacturing Optimus robots, signaling a strategic pivot toward what the company calls "physical AI." This manufacturing shift aligns with potential synergies between Tesla's robotics and SpaceX's space transportation capabilities.
Complex Financial Interconnections
The financial relationships between Musk's companies add another layer of complexity to the potential mergers. SpaceX invested $2 billion into xAI last year, and Tesla disclosed its own $2 billion xAI investment on Wednesday. Additionally, Tesla sold $430 million worth of backup batteries to xAI in 2025, according to CNBC reports. These existing financial ties could influence the structure and terms of any potential merger.
Precedent and Potential Impact
Musk has precedent for such consolidations, having merged X into xAI last year in a deal that valued the combined entity at $113 billion. Any new merger would likely delay SpaceX's planned June IPO, but it might also provide strategic advantages in the competitive AI landscape. Such a move could potentially allow Musk to beat OpenAI and Anthropic in the race to become the first major AI company to go public, creating a unique investment proposition for market participants.
The ultimate decision about which merger path to pursue—or whether to proceed with SpaceX as a standalone public company—will fundamentally alter what investors are buying into during what promises to be one of the most significant stock market debuts in financial history.
