NEW YORK, Jan 29 — SpaceX is exploring deals with other companies helmed by serial entrepreneur Elon Musk, leaving investors working through permutations between space, autonomous driving, and artificial intelligence (AI) to analyse which combination makes the most sense.
Reuters reported on Thursday that the rocket maker is in discussions to merge with xAI ahead of a blockbuster public offering planned for this year. According to a person briefed on the matter and two regulatory filings, the combination would bring Musk’s rockets, Starlink satellites, the X (formerly Twitter) social media platform, and Grok chatbot under one roof.
Reuters could not determine the deal's value, timing, or primary rationale. Meanwhile, Bloomberg reported that SpaceX is also considering a merger with Musk's electric vehicle maker Tesla.
"I think it is highly likely that (xAI) ends up with one of the two parties," said xAI investor Deepwater Asset Management managing partner and Tesla shareholder Gene Munster.
Musk, the world's richest man, is the chief executive officer (CEO) of SpaceX and the AI company xAI, which controls X. He also runs Tesla, the tunnel company The Boring Co, and the neurotechnology firm Neuralink.
"What is important for Elon is to have a massive vision that is way out there, that he is early on," Munster said, adding that a compelling prospect would be Tesla taking xAI, which would improve the EV maker's robot and self-driving car plans.
Late on Thursday, predictions hub Polymarket put the chance of a SpaceX-xAI merger by mid-year at 48 per cent and a Tesla-xAI merger at 16 per cent.
Musk, SpaceX, xAI, and Tesla did not respond to requests for comment. Tesla's share price rose three per cent in after-hours trade.
Reuters and other media have reported that SpaceX plans to go public sometime this year with a valuation likely above US$1 trillion (RM3.94 trillion). It is the world's most valuable privately held company, at US$800 billion (RM3.15 trillion) in a recent private share sale.
The Wall Street Journal reported that xAI was valued at US$230 billion (RM906.3 billion) in November, while Tesla's market capitalisation is US$1.4 trillion (RM5.52 trillion).
For SpaceX, a massive deal may complicate its initial public offering (IPO) but add momentum to efforts to launch data centres into orbit, a key goal in the escalating AI race against the likes of OpenAI, Meta Platforms, and Alphabet's Google.
Some Tesla shareholders have long advocated merging Musk's companies. Bloomberg reported that investors have been pushing for a merger between SpaceX and Tesla.
"Musk has too many separate companies. A major risk thesis for Tesla is that Musk is spreading himself out too much.
"As a Tesla shareholder, I applaud further consolidation," said Stock Trader Network chief market strategist Dennis Dick.
Under a SpaceX-xAI merger, xAI shares would be exchanged for SpaceX shares. Two entities have been established in Nevada to facilitate, said the person briefed on the matter, who requested anonymity because the discussions are confidential.
Filings showed those entities were set up on January 21 but did not detail their purpose or role in any deal. One lists SpaceX and its chief financial officer Bret Johnsen as managing members. The other lists him as the sole officer.
Johnsen did not respond to a request for comment.
Some xAI executives could be given the option to receive cash instead of SpaceX stock as part of the deal, said the person briefed on the matter. No final agreement has been signed, and the deal timing and structure remain fluid.
Data centers in space
Space-based AI processing, powered by solar energy, aims to reduce the cost of generating the computing power needed to run and train AI models such as xAI's Grok. Billionaire Jeff Bezos' Blue Origin has announced a high-capacity backbone network of thousands of satellites, while Google is researching space-based data centres under Project Suncatcher.
Speaking in Davos, Switzerland, last week, Musk — whose timing projections are rarely realised — said "the lowest cost place to put AI will be in space. And that will be true within two years, maybe three at the latest."
Building data centres in space is a risky proposition, considering AI is evolving rapidly and unpredictably. Analysts and executives have questioned whether the envisioned cuts in energy consumption are worth the cost of tailoring space systems.
Space research and advisory firm Quilty Analytics' Caleb Henry said that folding in xAI could also boost SpaceX's prospects for Pentagon contracts, which have sought to ramp up AI adoption in military networks.
Earlier this month, United States (US) Defence Secretary Pete Hegseth visited SpaceX's Starbase development site in Texas, where he said that xAI's language model and chat platform Grok will be integrated into military networks as part of an "AI acceleration strategy" aimed at speeding up military decision-making and planning.
xAI has a contract valued at up to US$200 million (RM788.1 million) to provide Grok products to the Pentagon. Through xAI, Musk is building out a supercomputer for AI training in Memphis, Tennessee, called Colossus.
Starlink and the national security variant Starshield already rely heavily on AI, including for automated satellite manoeuvres in orbit. Starshield, under contract with a US intelligence agency, is building a network of hundreds of classified satellites equipped with sensors widely expected to use AI to help track moving targets on Earth.
Latest merger between Musk companies
Musk has already been combining businesses. In 2016, he used Tesla stock to acquire the solar energy company SolarCity. Last year, he folded X into xAI in a share swap that gave the AI startup access to the microblog's data and distribution.
Last year, the Wall Street Journal reported that xAI also received a US$2 billion (RM7.88 billion) investment commitment from SpaceX as part of a US$5 billion (RM19.70 billion) equity fundraising.
This month, xAI raised US$20 billion (RM78.81 billion) in an upsized Series E funding round, exceeding its US$15 billion (RM59.11 billion) target at a US$230 billion (RM906.3 billion) valuation. It also gained a commitment of about US$2 billion from Tesla on Wednesday.
Ross Gerber, CEO of Tesla and xAI investor Gerber Kawasaki Wealth and Investment Management, said he could envision a marriage of Musk's businesses.
"It is like a bunch of overvalued companies merging together into one big overvalued mess run by Elon. But it is a pure play now.
"It is, like, you want to invest in Elon? Here you go. Like, you get all this. And it is much more attractive, actually, as an investment," he said.
