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Musk explores possible merger of SpaceX with Tesla or xAI

Elon Musk’s SpaceX is reportedly considering a merger with Tesla Inc. or an alternative combination with artificial intelligence company xAI, according to sources familiar with the matter. The discussions reflect Musk’s ongoing efforts to explore synergies across his business empire.

No final decisions have been made, and the companies could ultimately choose to remain independent, the sources added. Any potential transaction could involve significant financing and is expected to attract interest from infrastructure funds and Middle Eastern sovereign investors. Representatives for SpaceX, Tesla, and xAI did not respond to requests for comment.

Synergies between SpaceX, Tesla, and xAI

A merger between SpaceX and Tesla could leverage Tesla’s manufacturing capabilities, including energy storage systems, to support SpaceX’s proposed data centers in orbit. These data centers would be designed to perform complex computing for AI applications, potentially benefiting xAI’s operations. SpaceX has also explored using its Starship rockets to deploy Tesla’s Optimus robots for space missions, including lunar and Martian projects.

Both Tesla and SpaceX have already invested in xAI. Tesla committed roughly $2 billion to the AI startup during its latest earnings announcement, following SpaceX’s $2 billion investment earlier. These contributions amount to just over half of xAI’s total spending in the first nine months of 2025, according to Bloomberg News. A tie-up between SpaceX and xAI could further consolidate resources and strengthen Musk’s vision of integrating AI and space infrastructure.

Impact on IPO Plans and Market Reaction

A merger could affect SpaceX’s planned initial public offering, which sources suggest is being considered for June 2026, potentially raising up to $50 billion and becoming the largest IPO ever. Legal filings in Nevada indicate the creation of two entities with “merger sub” in their names, listing SpaceX CFO Bret Johnsen as an officer, further hinting at preparatory steps for a possible deal.

Tesla shares reacted positively to the news, jumping as much as 5.6% on Friday and giving the company a market valuation of approximately $1.65 trillion.

Sources also noted that xAI executives might have the option to receive cash instead of SpaceX stock if a merger occurs. Any such combination would reflect Musk’s long-standing strategy of exploring overlaps among his companies’ areas of innovation, particularly in AI, space exploration and robotics.