Elon Musk’s SpaceX is taking over his artificial intelligence (AI) start-up, as the billionaire continues to unify some of his many business interests.
SpaceX confirmed the deal to acquire xAI, a smaller firm known for its Grok chatbot, posting a memo from Musk about the merger on its website.
Terms of the deal were not disclosed. However, a source familiar said it valued xAI at $125bn (£91bn) and SpaceX at $1tn, making it the most valuable private company ever.
In his memo, Musk said the combination would form an “innovation engine” putting AI, rockets, space-based internet, and media under one roof. xAI began as a segment of X, formerly known as Twitter, after Musk acquired the social media platform in 2022, using its access to real-time text and information as AI training data.
By spring of 2025, it was independently incorporated and valued more highly by investors than X.
Its main product is Grok, which has come under scrutiny several times over its AI image generation feature.
In recent weeks, the European Commission and UK watchdog Ofcom both launched investigations into X over concerns Grok was used to create sexualised images. xAI said in January it had imposed restrictions on Grok users that limit image editing.
Emma Wall, chief investment strategist at Hargreaves Lansdown, said Musk was the market leader in the “two incredibly frontier technologies” of AI and space exploration.
She said because the new merger is entirely private, it hasn’t been tested by the market in the same way as Tesla, which is publicly listed.
“But what you’re seeing priced in at these valuations is a kind of multi-decade vision for the company to put… energy and energy generation into space, data centres into space,” she told BBC Radio 4’s Today programme.
However, Wall said any potential benefits would not be seen on earth for “10, 20, 30 years”.
‘Super company’
The huge merger comes after Musk’s electric car company, Tesla, announced a $2bn investment in xAI last month. Musk told Tesla investors that he envisioned xAI functioning as an “orchestra conductor” for Tesla factories employing autonomous robots.
He also said it would stop manufacturing two car models in favour of producing robots – one of the most significant pivots the company has made.
“It’s those type of technologies that he’ll be looking to leverage with this new kind of super company,” Wall told the Today programme.
Tesla moved forward with the xAI investment despite objections from some shareholders, who had questioned the decision to divert resources to another Musk firm.
In a vote last year, abstentions and votes against the idea outnumbered those who approved. SpaceX is also reported to be working on plans to list its shares for public trading.
Emily Zheng, a senior analyst at Pitchbook, said the deal for xAI has all the markings of a company preparing for a public listing.
“The sheer cost of compute, infrastructure, and energy is why we are seeing many of venture’s most valuable startups like SpaceX prepare to go public this year,” Zheng said.
“Consolidating these companies ahead of an IPO allows SpaceX to present a differentiated, capital-efficient growth narrative to public investors.”
IPO stands for Initial Public Offering, and this is when a private company first sells its stock to the public on a stock exchange.
Scaling ambitions
In the SpaceX memo announcing the xAI merger, Musk said he thought space would provide the solution to the energy needs faced by AI firms.
Source: www.kumasimail.com
