Musk's $1.25 Trillion Empire Takes Shape as SpaceX Absorbs xAI

$1.25 trillion. If this valuation holds, Musk's newly combined empire would be worth more than the entire GDP of most countries. On February 2nd, rocket maker SpaceX officially absorbed AI startup xAI, setting the stage for what could be the largest IPO in corporate history.

The deal creates what SpaceX calls "the most ambitious, vertically-integrated innovation engine on (and off) Earth," combining rockets, artificial intelligence, space-based internet, and social media under one corporate umbrella.

The Vertical Integration Play

Public records from Nevada show the merger completed on February 2nd, with Space Exploration Technologies Corp. listed as the "managing member" of X.AI Holdings. This represents the largest tie-up in Musk's sprawling business portfolio, bringing together two companies that have been soaring in private market valuations.

SpaceX opened a secondary share sale last year at an $800 billion valuation, while xAI was valued at approximately $230 billion in a $20 billion funding round that closed earlier this year. Adding fuel to the fire, Tesla committed about $2 billion to invest in xAI last week, creating an intricate web of cross-investments within Musk's empire.

The numbers tell a compelling story. According to Reuters, SpaceX generated an estimated $8 billion in profit on $15-16 billion of revenue in 2025. The company has become the dominant orbital launch provider through NASA contracts and operates Starlink, which has more than 9,000 satellites in orbit serving roughly 9 million customers.

Regulatory Storm Clouds Gathering

But this consolidation isn't happening in a vacuum. xAI faces mounting regulatory scrutiny in Europe, India, and California after its Grok AI tools enabled users to generate sexualized images of children and non-consensual intimate images of adults. These investigations could complicate the IPO timeline and valuation.

The merger follows Musk's 2023 combination of xAI with social network X (formerly Twitter). He launched xAI as a direct competitor to OpenAI, the company he co-founded in 2015 but left in 2018. The rivalry has since escalated into a heated legal battle with OpenAI CEO Sam Altman.

Market Implications and Competitive Response

This consolidation raises fundamental questions about competition in both the space and AI sectors. Traditional aerospace companies like Boeing and Lockheed Martin now face a competitor that can leverage AI capabilities, satellite infrastructure, and social media reach in ways they simply can't match.

For AI competitors like OpenAI, Google, and Microsoft, the challenge is different but equally daunting. They're competing against a company that can train AI models using real-time satellite data, test algorithms in space, and deploy them across a global communications network.

The timing is particularly strategic. As the AI race intensifies and space commercialization accelerates, Musk is positioning his combined entity to dominate both frontiers simultaneously. The question is whether this vertical integration creates genuine synergies or simply concentrates risk.