Elon Musk's SpaceX acquires xAI in record-setting deal ahead of mega IPO

Billionaire Elon Musk said on Monday that his rocket venture, SpaceX, has acquired his artificial-intelligence startup xAI in a record-setting deal.

The deal was announced in a memo, sources told Bloomberg. According to the Associated Press, SpaceX announced on Monday that it had acquired xAI in an effort to help the world's richest man dominate the rocket and AI businesses.

The deal will combine several of his offerings, including his AI chatbot Grok, his satellite communications company Starlink, and his social media company X.

The development comes as SpaceX is planning an initial public offering (IPO) that could raise as much as $50 billion and value the company at about $1.5 trillion, Bloomberg News reported. It also discussed a possible merger with Tesla.

The deal, first reported by Reuters last week, could bolster SpaceX’s data-centre ambitions as Musk competes with rivals like Alphabet's Google, Meta, Amazon-backed Anthropic and OpenAI in the AI sector.

The transaction values SpaceX at $1 trillion, and xAI at $250 billion, according to a person familiar with the matter.

"This marks not just the next chapter, but the next book in SpaceX and xAI's mission: scaling to make a sentient sun to understand the Universe and extend the light of consciousness to the stars!" Musk said.

New record

The purchase of xAI sets a new record for the world's largest M&A deal, a distinction held for more than 25 years when Vodafone bought Germany’s Mannesmann in a hostile takeover valued at $203 billion in 2000, according to data compiled by LSEG.

The combined company of SpaceX and xAI is expected to price shares at about $527 each, another person familiar with the matter said.

SpaceX was already the world's most valuable privately held company, last valued at $800 billion in a recent insider share sale. XAI was last valued at $230 billion in November, according to The Wall Street Journal.

The merger comes as the space company plans a blockbuster public offering this year that could value it at over $1.5 trillion, two people familiar with the matter told Reuters.

SpaceX, xAI and Musk did not immediately respond to requests for comment.

The deal further consolidates Musk's far-flung business empire and fortunes into a tighter, mutually reinforcing ecosystem – what some investors and analysts informally call the "Muskonomy" – which already includes Tesla, brain-chip maker Neuralink and tunnel firm the Boring Company.

The world's richest man has a history of merging his ventures together. Musk folded X into xAI through a share swap last year, giving the AI startup access to the platform’s data and distribution. In 2016, he used Tesla's stock to buy his solar energy company SolarCity.

The agreement could draw scrutiny from regulators and investors over governance, valuation and conflicts of interest given Musk's overlapping leadership roles across multiple firms, as well as the potential movement of engineers, proprietary technology and contracts between entities.

SpaceX also holds billions of dollars in federal contracts with NASA, the Department of Defense and intelligence agencies, which all have some authority to review M&A transactions for national security and other risks.

(With inputs from Agencies)