As announced at the beginning of the week, SpaceX acquired artificial intelligence startup xAI, thus merging two of Musk’s businesses into one. Following the merger, SpaceX's valuation is reportedly $1.25 trillion, making it the highest-valued privately held company.
The move may be seen as strategic, aimed at unifying the resources of two companies and fostering innovation, especially in the construction of orbital data centers, which Musk believes would be more efficient than those on Earth, which face constraints. Bringing together the technologies of the businesses, Elon Musk would gain an advantage in competing with other market giants.
However, it should also be noted that the underlying reason may lie in the upcoming SpaceX IPO, expected later this year. Formerly, the valuation was estimated at roughly up to $1.5 trillion; now, with this acquisition, this figure may go higher.
In addition, the merger may enhance xAI's position in a highly competitive AI market, as SpaceX brings its investments. While SpaceX is a prominent player in its segment, xAI is, for now, in its startup phase. Moreover, the latter also frequently faces regulatory scrutiny, with the European Commission initiating a formal investigation into the deployment of X and xAI chatbot Grok, among other cases.
Though there were formerly instances of interaction between the companies — for example, when the same person worked for both simultaneously — the acquisition is to test the compatibility of the corporate culture of both companies.
Apart from that, another Elon Musk company — Tesla — earlier announced a $2 billion investment in xAI, though investors did not support the decision a year earlier. This investment and associated agreement framework are aimed at advancing AI collaboration between the companies, which is especially critical for Tesla given Elon Musk’s announcement of the Optimus project as the company's focus in the coming years.
The deal also raised questions about a potential merger between Tesla and SpaceX. Some analysts believe the merger, in some form, may occur within the next two years. Currently, Polymarket prices the probability of such an announcement by the middle of this year at 17%. Earlier, there was another merger between Musk’s companies, when xAI acquired X to join forces.
Though this year is expected to witness many other IPOs, including Strava and Discord IPO, which have confidentially filed for the initial public offering, and potentially even OpenAI and Anthropic, the SpaceX IPO may become one of the largest, drawing the most market attention.
This article was written in cooperation with TRADINGVIEW