SpaceX, the aeropsace company owned by Elon Musk, has acquired xAI, his AI venture, in a $1.25 trillion merger that would see the consolidation of two of Musk’s major firms before he takes SpaceX public.

The two companies said the deal would form “the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s foremost real-time information and free speech platform.”

SpaceX is set to gain some of xAI’s properties, including social media platform X and AI chatbot Grok.

In the deal, SpaceX was reportedly valued at $1 trillion, with xAI having a valuation of $250bn.

Citing Musk’s motivations for the deal, the announcement explicity highlighted the CEO’s ambitions to build data centres and satellites in space to increase power capacity for AI.

“Current advances in AI are dependent on large terrestrial datacenters, which require immense amounts of power and cooling. Global electricity demand for AI simply cannot be met with terrestrial solutions, even in the near term, without imposing hardship on communities and the environment,” the deal announcement said, dubbing “space-based AI” as “the only way to scale.”

The new deal follows a period of Musk consolidating his businesses – xAI acquired X in early 2025, and Tesla planned on investing $2bn in the AI businesses as recently as last month.

Musks’ firms are facing a mixed reception in the market: SpaceX has had its valuations bolstered by lucrative deals with the US federal government to continue building satellites, though Tesla’s recent earnings report showed a slump in revenues.

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Meanwhile, xAI has faced global controversy of the recent torrent of sexually explicit non-consensual deepfakes of women and even children profiferating across X, generated using Grok. xAI pulled the ‘spicy mode’ feature from nations where that type of illicit image generation is illegal, but has not fully disabled the feature.

Musk is facing controversy of his own, with the recent Department of Justice release of documents concerning sex offendor and disgraced financier Jeffrey Epstein, which showed Musk exchanging emails with the late criminal concerning potential visits to his private island.

Musk has since called the relese of this correspondence a “distraction” and that he is “well aware that some email correspondence with him could be misinterpreted and used by detractors to smear my name.”