SpaceX and Elon Musk’s AI startup xAI are reportedly in discussions over a potential merger ahead of a possible public offering later this year, according to Reuters.

The plan under consideration would involve exchanging xAI shares for SpaceX shares, effectively bringing several Musk-led ventures—SpaceX, Starlink, X, and xAI—under one corporate umbrella.

While two Nevada-based entities have been set up to facilitate the deal, no final agreement has been signed and key details, including valuation and timing, remain unresolved.

Strategic Push Into Space-Based AI

The talks align with Musk’s broader ambition to position SpaceX as a foundation for next-generation AI infrastructure, including data centers in orbit.

Musk has argued that space could become the lowest-cost environment for large-scale AI computing within a few years.

SpaceX has already invested $2 billion in xAI, which is building a massive supercomputer called “Colossus” in Memphis, while rivals like Blue Origin and Google are also exploring orbital computing concepts.

Defense, Valuations, and IPO Plans

A combined SpaceX–xAI entity could strengthen Musk’s position in securing U.S. defense contracts, where AI-enabled satellite systems are increasingly critical. xAI already holds a Pentagon contract worth up to $200 million, while SpaceX’s Starlink and Starshield units rely heavily on AI-driven operations.

SpaceX is currently valued at around $800 billion, xAI at roughly $230 billion, and reports suggest SpaceX is preparing for an IPO that could push its valuation beyond $1 trillion—making this potential merger one of the most consequential consolidations in Musk’s business empire.