Musk merger creates $1.25T privately-held company ripe for IPO, but what about Tesla?

Elon Musk has dramatically altered the outlook for an eventual SpaceX public offering by merging his artificial intelligence venture, xAI, into the aerospace company, creating a privately held colossus valued at roughly $1.25 trillion.

People familiar with the transaction say the deal pegs SpaceX at around $1 trillion, while assigning xAI a valuation near $250 billion, with ambitions to take the combined entity public as early as later this year. The move also folds xAI’s assets including the X social media platform and the Grok chatbot into SpaceX, uniting rocket launches, satellite internet, social distribution, and advanced AI under a single corporate structure.

However, as recently as last week, there was speculation that any merger would include Tesla with some analysts now questioning whether the EV maker will be sidelined by the new entity. Early Tuesday, Tesla stock was largely unchanged by the unfolding news. 

SpaceX already commands the title of the world’s most valuable private company, backed by its leadership in commercial launches and lucrative government and Starlink contracts. Adding xAI at such a lofty valuation assumes Musk can transform a cash-intensive AI operation into a meaningful profit driver, rather than a long-term financial burden.

Musk has justified the strategy by pointing to physical limits on Earth. In a note published on SpaceX’s website, he argued that today’s AI progress relies on massive ground-based data centers that consume enormous amounts of electricity and cooling and suggesting that “in the long term, space-based AI is obviously the only way to scale.”

If that is the case, early public investors would gain exposure to something approaching an infrastructure choke point: rockets, satellite networks, and orbital computing capacity all controlled by one company. Such dominance could warrant valuation multiples rivalling, or exceeding, those of today’s largest AI-focused tech firms.

However, the consolidation intensifies governance and key-person risk as Musk already wields outsized influence across several major companies and this deal further centralizes strategic control. Any IPO would ask investors to accept not only technological uncertainty but also heightened regulatory and political scrutiny spanning national security, AI safety, and online content governance.