SpaceX, xAI & X: Elon Musk’s Profitable Puzzle

Elon Musk’s SpaceX completed its merger with his artificial intelligence company, xAI, on February 3, 2026, creating a single entity valued at $1.25 trillion, according to a source familiar with the deal. The move consolidates Musk’s diverse business interests and positions the combined company as the most valuable private entity globally.

The merger follows a period of internal upheaval at xAI, including the departure of several co-founders. Zihang Dai and Guodong Zhang recently left the company, joining Jimmy Ba and Tony Wu, who announced their exits in the preceding months, according to reports. Musk acknowledged the challenges in building xAI, stating on X, which is now owned by SpaceX, that the company “was not built right first time around, so is being rebuilt from the foundations up.”

The consolidation began with the merger of X, formerly Twitter and xAI in March 2025. Legal firm Sullivan and Cromwell assessed the valuations of both companies at that time, determining X to be worth $33 billion and xAI $80 billion, totaling $113 billion. A year later, xAI’s board re-evaluated its worth, concluding a fair value of $250 billion.

SpaceX’s planned initial public offering (IPO) in July 2026 will include shares of X and xAI, effectively offering investors a stake in all three companies simultaneously. An insider sale in December 2025 valued SpaceX at $800 billion. The combined valuation of $1.5 trillion for SpaceX, X, and xAI is intended to attract investors, though analysts suggest the valuation relies on the synergy of the three entities rather than SpaceX’s independent worth.

xAI’s primary product, the Grok chatbot, has faced scrutiny, particularly regarding its AI image generation capabilities. Both the European Commission and the UK’s Ofcom launched investigations into X over concerns that Grok was being used to create sexualized images. XAI responded by implementing restrictions on Grok users to limit image editing.

The merger is expected to reduce SpaceX’s profits by more than half, according to analysis of the deal. Despite this, Emma Wall, chief investment strategist at Hargreaves Lansdown, noted Musk’s leadership in both AI and space exploration. She also pointed out that, as a private merger, the valuation has not been subject to the same market scrutiny as publicly listed companies like Tesla.

SpaceX has not commented on the specific financial implications of the merger beyond the overall valuation. The company is preparing for its IPO, which is anticipated to be a record-breaking event.