SpaceX is in merger talks with other Musk companies ahead of the IPO

Under the SpaceX-xAI merger, xAI shares will be exchanged for SpaceX shares. Two organizations have been established in Nevada for the facility, the person briefed on the matter asked not to be named because the discussions are confidential.

The filings show those entities were established on January 21 but did not detail their purpose or role in any deal. One lists SpaceX and its chief financial officer, Brett Johnson, as managing members. Others list Johnsen as the sole authority.

Johnson did not respond to a request for comment.

Some xAI executives may be given the option to receive cash instead of SpaceX stock as part of the deal, the person briefed on the matter said. No final agreement has been signed and the timing and structure of the deal remains fluid, the person said.

Data centers in space

Space-based AI processing, powered by solar energy, aims to reduce the cost of generating computing power to run and train AI models like xAI’s Grok. Billionaire Jeff Bezos’ Blue Origin has announced a high-capacity backbone network of thousands of satellites, while Google is investigating space-based data centers under Project Suncatcher.

Speaking in Davos, Switzerland, last week, Musk – whose timeline is rarely realized – said “the lowest-cost place to put AI will be in space. And that will be true within two years, maybe the next three.”

Building data centers in space is a risky proposition considering AI is evolving rapidly and unpredictably. Analysts and executives have questioned whether the envisioned reductions in energy consumption are worth the cost of tailoring systems for space.

Folding in xAI could also boost SpaceX’s prospects for contracts at the Pentagon, which is looking to ramp up AI adoption in military networks, said Caleb Henry of space research and consultancy Quilty Analytics.

US Defense Secretary Pete Hegseth visited SpaceX’s Starbase development site in Texas this month where he said 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 $200 million contract to provide Grok products to the Pentagon. With xAI, Musk is building a supercomputer called Colossus for AI training in Memphis, Tennessee.

Starlink and the national security variant Starshield already rely heavily on AI, such as for automated satellite maneuvers in orbit. Starshield, under a contract with a US intelligence agency, is building a network of hundreds of classified satellites equipped with sensors that are widely expected to use AI to track moving targets on Earth.

The latest merger between Musk’s companies

Musk has already been combining businesses. In 2016, he used Tesla stock to buy 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.

xAI also received a $2 billion investment commitment from SpaceX as part of a $5 billion equity fundraising, the Wall Street Journal reported last year.

This month, xAI raised $20 billion in an upsized Series E funding round, surpassing its $15 billion target at a $230 billion valuation. It also received a commitment of about $2 billion from Tesla on Wednesday.

Ross Gerber, CEO of Tesla and xAI investor Gerber Kawasaki Wealth & Investment Management, said he could envision a marriage of the Musk businesses.

“It’s like a bunch of overvalued companies merged together into one big overvalued mess run by Elon. But it’s pure play now. It’s like, you want to invest in Elon? Go here. Like, you get it all. And it’s very attractive, actually, as an investment.”

(Reporting by Iko Wang and Joey Roulette; Additional reporting by Milna Winn, Sabrina Valle, David Jeans and Abhirup Roy; Editing by Paritosh Bansal, Peter Henderson and Christopher Cushing)