Elon Musk's Spacex weighs merger with Tesla or xAI ahead of IPO plans

Elon Musk's SpaceX is exploring a potential merger with Tesla or AI firm xAI, a move that could reshape its IPO plans and consolidate Musk's business empire

SpaceX is considering a potential merger with Tesla Inc., as well as an alternative combination with artificial intelligence firm xAI, according to people familiar with the matter, a sign billionaire Elon Musk is weighing how to consolidate his empire. 

The firm has discussed the feasibility of a tie-up between SpaceX and Tesla, an idea that some investors are pushing, the people said, asking not to be identified as the information isn’t public. Separately, they are also exploring a tie-up between SpaceX and xAI ahead of an IPO, some of the people said. 

Any transaction could attract sizeable interest from infrastructure funds and Middle Eastern sovereign investors, some of the people said. A deal could also potentially require a large financing component, one of them said. 

 

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No final decisions have been made, details could change and the companies could decide to remain separate, the people said. Musk and representatives for SpaceX, xAI and Tesla didn’t respond to requests for comment. 

Tesla shares jumped as much as 5.6 per cent on Friday, after climbing in after-hours trading on Thursday. The trading gives the company a market value of about $1.65 trillion. 

Musk’s Vision 

Different parts of Musk’s grand vision for SpaceX — of the company putting data centers into space to do complex computing for AI — would potentially be served by the various scenarios. xAI could benefit enormously from computing capacity provided by SpaceX’s data centers in orbit, if the company can make the engineering work. 

Tesla’s ability to manufacture energy storage systems could help SpaceX use solar energy in space to run the data centers.  Musk has also discussed using SpaceX’s Starship rockets to carry Tesla’s Optimus robots to the moon as well as to Mars. 

Both SpaceX and Tesla already have ties to xAI. Musk announced during Tesla’s latest earnings that the company is making an investment of about $2 billion in xAI, coming months after SpaceX agreed to put $2 billion of its own in the AI firm. The combined figure is a bit more than half of the amount xAI spent just in the first nine months of 2025, Bloomberg News has reported.  

Musk has often considered the overlap between his companies’ areas of interest and proposed different combinations. He has suggested that Tesla’s AI programs are crucial for its future, and at other times hinted that he might move them to xAI. 

IPO Timeline 

A merger with either firm could potentially put SpaceX’s IPO timeline in question. SpaceX is weighing a June listing, around Musk’s birthday, and could seek to raise as much as $50 billion, people familiar with the matter have said. That would make it the biggest IPO of all time. 

Two legal entities with the phrase “merger sub” in their names were set up in Nevada on Jan. 21 that count SpaceX Chief Financial Officer Bret Johnsen as officers, Nevada’s business portal shows.  

Reuters reported the potential merger between SpaceX and xAI earlier. Shares of xAI would be exchanged for shares in SpaceX, Reuters said, citing a person familiar with the matter. 

Some xAI executives may have the option to receive cash instead ‍of SpaceX stock as part of the merger, Reuters said.  

SpaceX is targeting an IPO that would value it at about $1.5 trillion, Bloomberg News has reported. Bank of America Corp., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley are expected to have senior roles. 

Robinhood Markets Inc., the upstart broker credited with getting young people hooked on trading, is vying for a key role in SpaceX’s blockbuster initial public offering, Bloomberg News reported Wednesday. 

SpaceX’s Johnsen told employees in December that a potential IPO would help fuel an “insane flight rate” for its developmental Starship rocket and a possible base on the moon.