By Echo Wang and Joey Roulette
NEW YORK, Jan 29 (Reuters) – SpaceX and Elon Musk’s xAI are in talks to merge ahead of a successful public offering planned for later this year. The combination would bring Musk’s rockets, Starlink satellites, social media platform X and Grok AI chatbot under one roof, according to a person briefed on the matter and two recent company documents seen by Reuters.
The plan, which Reuters reports exclusively, would give new impetus to SpaceX’s effort to launch data centers into orbit as Musk battles for supremacy in the fast-growing AI race against tech giants such as Google, Meta and OpenAI.
Musk, the world’s richest man, is CEO of both private space company SpaceX and artificial intelligence company xAI, which controls its social media platform X. He also runs electric car maker Tesla, tunneling company The Boring Co. and neurotechnology company Neuralink.
Musk, SpaceX and xAI did not respond to requests for comment.
In the proposed merger, xAI shares would be exchanged for shares in SpaceX. Two entities have been set up in Nevada to facilitate the transaction, the person said.
Reuters could not determine the deal’s value, its rationale or its potential timing.
Nevada corporate filings show those entities were incorporated on Jan. 21. One of them, a limited liability company, lists SpaceX and Bret Johnsen, the company’s chief financial officer, as directors, while the other lists Johnsen as the company’s sole officer, the filings show.
The documents do not contain additional information about the purpose of the companies or their role in any transaction.
Johnsen did not respond to a Reuters request for comment.
The person, who requested anonymity because the discussions are confidential, said some xAI executives could be given the option to receive cash instead of SpaceX stock as part of the deal. A final agreement, however, has not been signed and the timing and structure of the deal remain fluid, the person warned.
SpaceX is already the world’s most valuable private company, last valued at $800 billion in a recent insider stock sale. xAI was valued at $230 billion in November, according to the Wall Street Journal. Reuters and other media have reported that SpaceX plans to go public sometime this year, with an estimated valuation of more than $1 trillion.
Through xAI, Musk is building a massive AI training supercomputer in Memphis, Tennessee called Colossus. Last year, SpaceX agreed to invest $2 billion in xAI as part of the startup’s $5 billion equity fundraising, the Wall Street Journal reported at the time.
Speaking in Davos, Switzerland, last week, the billionaire entrepreneur said “the cheapest place to put AI is going to be in space. And that’s going to happen in two years, maybe three at the latest.”
Space-based AI processing, powered by solar energy, aims to reduce the cost of generating the computing power that runs and trains AI models, such as xAI’s Grok. Jeff Bezos’ Blue Origin has announced a new high-capacity network of thousands of satellites, while Google is exploring space data centers with its Suncatcher project.
Building data centers in space remains a risky proposition, especially with AI investments evolving so rapidly and often unpredictably. Analysts and some industry executives have questioned whether the expected reductions in energy consumption are worth the additional costs of adapting these systems for space.
Improving xAI in SpaceX could boost the company’s bid for major defense contracts at the Pentagon, which has been trying to ramp up AI adoption in its military networks, said Caleb Henry of space research and consulting firm Quilty Analytics.
US Defense Secretary Pete Hegseth visited SpaceX’s Starbase development site in Texas earlier this month, where he said the xAI language model and its Grok chat platform will be integrated into military networks as part of the Pentagon’s “AI acceleration strategy” aimed at speeding up military decision-making and planning.
xAI has a contract worth up to $200 million to supply Grok products to the Pentagon.
Starlink and its national security variant Starshield already rely heavily on artificial intelligence, such as for automated satellite maneuvers in orbit. Starshield, under contract with a US intelligence agency, is building a network of hundreds of classified satellites equipped with various sensors, which are expected to use AI to help track moving targets on Earth.
The deal would not be Musk’s first effort to combine the businesses he controls. In 2025, he turned social media platform X into xAI in a stock exchange that gave the AI startup access to the platform’s data and distribution. Before that, in 2016, he used Tesla stock to buy his solar energy company SolarCity.
Earlier this month, xAI raised $20 billion in an expanded Series E funding round, surpassing its $15 billion goal at a $230 billion valuation. Tesla, Musk’s electric car company, said Wednesday it had agreed to invest about $2 billion in xAI.
Founded in 2002, SpaceX disrupted the global space industry with its reusable Falcon rockets, which proved vital to the rapid launch of Starlink, a broadband satellite network now consisting of thousands of satellites in space.
SpaceX has lined up the banks for an IPO that could happen as early as this year.
(Reporting by Echo Wang and Joey Roulette; Additional reporting by Milanna Vinn, Sabrina Valle and David Jeans; Editing by Joe Brock, Dawn Kopecki and Michael Learmonth)
