Elon Musk is exploring a major consolidation of his ventures, potentially merging SpaceX with either his AI startup xAI or electric car giant Tesla. This move, ahead of SpaceX’s planned $1.5 trillion IPO, could create a powerful entity focused on space-based AI infrastructure or an energy-meets-exploration powerhouse. Planning appears advanced with new Nevada entities registered.

Elon Musk is considering merging SpaceX with either his AI startup xAI or electric vehicle maker Tesla, a consolidation that would reshape his already intertwined business empire just months before SpaceX’s highly anticipated public debut.The Wall Street Journal, Reuters, and Bloomberg all reported on the talks Thursday, citing people familiar with the matter. While no final decisions have been made, two “merger sub” entities were registered in Nevada on January 21, with SpaceX CFO Bret Johnsen listed as an officer—suggesting the planning is more than theoretical.SpaceX is preparing for a summer IPO that could value it at $1.5 trillion, making it the largest stock market debut in history. But which merger path Musk chooses could fundamentally alter what investors are actually buying into.

The xAI deal: Building AI infrastructure in orbit

Merging SpaceX with xAI would advance Musk’s stated goal of launching data centers into space. At the World Economic Forum in Davos last week, he declared that “the lowest-cost place to put AI will be space” within two or three years, powered by solar energy and free from Earth’s energy grid constraints.xAI, valued at $230 billion in November, owns the Grok chatbot and X social media platform. Combining it with SpaceX would create a vertically integrated operation spanning rockets, satellite internet through Starlink, AI development, and social media distribution. According to Reuters, xAI shares would convert to SpaceX stock, though some executives might receive cash instead.The deal could also strengthen SpaceX’s Pentagon relationships. Defense Secretary Pete Hegseth visited SpaceX’s Texas facility earlier this month, announcing plans to integrate Grok into military networks. xAI already has contracts worth up to $200 million with the Department of Defense.

The Tesla scenario: Energy meets exploration

Bloomberg reports that some investors are pushing for a SpaceX-Tesla combination instead. The logic is straightforward: Tesla manufactures the energy storage systems that could help SpaceX run those orbital data centers on solar power.There’s overlap in Musk’s vision, too. He’s discussed using Starship rockets to transport Tesla’s Optimus humanoid robots to the moon and eventually Mars. Tesla just announced it’s converting its Fremont factory from producing Model S and Model X vehicles to making Optimus robots, signaling a pivot toward what the company calls “physical AI.”The merry-go-round of investments between Musk’s companies adds another layer. SpaceX put $2 billion into xAI last year, and Tesla disclosed its own $2 billion xAI investment on Wednesday. Tesla also sold $430 million worth of backup batteries to xAI in 2025, according to CNBC.Musk has form here—he merged X into xAI last year in a deal that valued the combined entity at $113 billion. Any new merger would likely delay the June IPO, but it might also let Musk beat OpenAI and Anthropic in the race to become the first major AI company to go public.