SpaceX and xAI Complete Merge

The "Muskonomy" lives to see another day, in a new light. ☀️

SpaceX

It feels like just yesterday I wrote about the prospects of the SpaceX merge and the June, 2026 IPO plans. Now it’s already official:

SpaceX plans to build over a million special satellites optimize or function them as orbital datacenters. They still plan to do a 2026 IPO, best case scenario around the end of June.

While xAI have been funding and spending big, they don’t have many customers who actually use Grok. As of early 2026, xAI’s "customer" base is split into two primary categories: hundreds of millions of individual consumers and a growing, though still relatively small, list of enterprise and government clients.

In theory xAI should have become a major competitor of OpenAI and Anthropic by now, but it seems uncertain. A lot will depend on how good the upcoming Grok 5 models is, that might coincide with DeepSeek’s next flagship model.

Elon Musk is a Dreamer

Elon Musk does like to make big plans, but at least Starlink is growing and making money.

SpaceX generated about $8 billion in profit on $15 billion to $16 billion of revenue ​last year, two people familiar with the company's results said to Reuters recently.

xAI is burning at least $1 Bn. a quarter on AI Infrastructure and other costs. SpaceX will be pushing the orbital datacenters promise to help get people excited about the IPO but this is a capital situation that was quickly becoming untenable for xAI.

They want to IPO at least $1.5bn and now they value it at nearly that much. The combined company is expected to price shares in an IPO that would value it at $1.25 trillion, Bloomberg reported.

Meanwhile Tesla will likely be merged with SpaceX too at a later date and may end up being more of an Energy company than a robotics or car company I speculate. Tesla’s Capex is going way up in 2026 and their future remains highly uncertain as a smart car EV maker.

xAI has been Rushed

xAI’s models and compute projects have been, super rushed since 2022. Meanwhile China has been moving faster too.

xAI will join huge companies doubling down on AI like Meta, ByteDance, Alibaba and Amazon. Microsoft and Apple don’t look like they will be winners in the Generative AI era at all. OpenAI’s own datacenter approach with Oracle taking on more and more debt looks fairly speculative given they now have peer competitors who are overtaking them in Google and Anthropic.

That leaves xAI with tons of direct competitors. xAI has done a lot of funding for a three year old AI startup.

As of early 2026, xAI has raised a cumulative total of approximately $32 billion to $33 billion in funding.

It’s not clear what being “acquired” by another Elon Musk company even consists of.

Whatever the details: Public records with the state of Nevada, obtained by CNBC, indicate that the deal was completed on Feb. 2, with Space Exploration Technologies Corp. listed as the “managing member” of X.AI Holdings. Basically they are now just a subsidiary of SpaceX.

SpaceX has a decent first advantage lead as a rocket company that makes its own low-cost Sats. But now a rush of Space-technology companies will go public including names like Blue Origin and Galactic Energy, names to watch in the future.

But xAI doesn’t make much revenue, even three years later. xAI reported approximately $107 million in revenue for Q3 2025. This was a significant jump, nearly doubling the ~$54 million reported in the previous quarter. It’s pretty tiny for how much Elon Musk has been focusing on it, disappointing to say the least. Grok is cheeky but not considered a leading tier of model. Together they might not even be profitable. The $1.5 Trillion valuation this summer will seem far fetched given how much competition they both will face in the future both as rocket companies and in AI. They ironically will need Tesla to stay afloat. This including as fast as Starlink is growing.

There’s no guarantee this entity will even exist by 2040, that’s how fast I expect things to move.

How does xAI make money

The company generates income through three primary channels:

1. Consumer Subscriptions: Paid tiers on the X platform, specifically SuperGrok (~$30/month) and the high-performance SuperGrok Heavy ($300/month).

2. Enterprise API: Charging other companies and developers to build applications using Grok’s real-time data processing capabilities.

3. Strategic Integrations: High-value partnerships with Elon Musk’s other companies, notably Tesla (for Optimus robot intelligence) and SpaceX (for space-based compute).

The future of consumer and Enterprise AI are going to be big pie and xAI can still grow into a fairly large revenue generating company eventually, but it will take a lot of effort and maybe a decade. Tesla’s revenue has already started to decline.

Elon Musk is a fun person to watch, but maybe not the best in business or future strategy.

SpaceX Says Orbital Data Centers are Needed

SpaceX went on to claim:

“Current advances in AI are dependent on large terrestrial data centers, 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.”

Now for the Elon Musk hallucination to justify it:

“In the long term, space-based AI is obviously the only way to scale. To harness even a millionth of our Sun’s energy would require over a million times more energy than our civilization currently uses!”

So obvious! 🤔

Now I’m not sure the FCC will even approach the million or so Satellites they are seeking to put up there. You heard that right:

SpaceX has filed a request with the Federal Communications Commission to launch a constellation of up to 1 million solar-powered satellites that it said will serve as data centers for artificial intelligence.

Tesla will certainly merge with SpaceX too, because its Energy and solar is an impressive growth story. Space mining and energy might be better industries than humanoid robotics and FSD at this point as future industries to build out and be first in. Now I don’t believe Tesla will lead in Optimus robots vs. the competition that is coming from China. Waymo is way ahead in terms of Tesla robotaxis business and Uber has the distribution edge.

SpaceX + xAI + Tesla can survive, but a lot of things will have to go right including competition well with peer competitors. So far Elon Musk is not executing on that front very well.

America is way behind China in Energy and thus will push the Space angle, and thus some of that AI capex is going to push us to space, one way or another:

“My estimate is that within 2 to 3 years, the lowest cost way to generate AI compute will be in space. This cost-efficiency alone will enable innovative companies to forge ahead in training their AI models and processing data at unprecedented speeds and scales, accelerating breakthroughs in our understanding of physics and invention of technologies to benefit humanity.

This new constellation will build upon the well-established space sustainability design and operational strategies, including end-of-life disposal, that have proven successful for SpaceX’s existing broadband satellite systems.” - Elon Musk

Elon Musk’s Consortium Grows another Arm

Terms of the deal were not disclosed. However, a source familiar said it valued xAI at $125bn (£91bn) and SpaceX at $1tn, making it the most valuable private company ever.

The reason SpaceX will go IPO in June or later in 2026, is simply, they need the cash.

A SpaceX IPO is expected to raise about $50 billion at a valuation exceeding $1.5 trillion.

But there are currently already only about 15k Satellites in orbit, and space junk is already a huge problem. How can the Earth have millions of more?

The Verge

SpaceX claims its Orbital datacenter system would deliver the computer capacity required to serve "billions of users globally".

For a company like SpaceX, I’m not even sure $50bn from an IPO is that helpful. The richest man in the world will try to compete though, even as his age and increasingly political preferences seems to be impacting his performance and aptitude for businesses clarity and future vision.

Towards a Kardashev II-level civilization

Still, the SpaceX IPO is an important moment in technology ushering in a world of more National defense spending, more space technology public companies and more quantum, emerging tech and robotics emphasis all-around. Elon Musk is a pioneer, but he’s not likely the face of the future for much longer.

A Kardashev Type II civilization is a hypothetical, advanced society capable of harnessing the total energy output of its host star. Elon Musk and Sam Altman talk big, but when leaders over-promise it’s a huge red flag.

SpaceX has certainly been first. Starlink has 9,600 up. That’s like having 64% of space control. But that won’t last long. Nor will SpaceX’s place as the leading rocket company, there are at least ten decent companies coming soon and already knocking on the door.

Space Infrastructure is likely to be led by China and energy too, but American capital will try to say otherwise. Orbital datacenters will clearly however be very expensive to maintain. Blue Origin has actually been working on the engineering aspect of them for far longer and with way more due diligence on SpaceX that is trying to juice the story for framing itself as the hero. Space-tech enthusiasts however know that’s not the full story.

xAI managed to get funding from Nvidia, Cisco as well as huge investors like Valor Equity Partners, Stepstone Group, Fidelity, Qatar Investment Authority, Abu Dhabi’s MGX and Baron Capital Group. That’s a lot of Middle East backers.

Dreams Powered by Starlink

Starlink’s revenue growth is the only hero story in all of these mergers.

Starlink has transitioned from a high-cost startup to a primary profit driver for SpaceX, generating an estimated $6.5 billion to $8+ billion in annual revenue as of early 2025. With over 9 million users, rapid subscriber growth and increasing military contracts have enabled the company to achieve positive free cash flow, with revenue projected to exceed $11.8 billion by the end of 2025.

Starlink will also face major competition in the next few years.

SpaceX like many of the promises of Tesla were always going to be more aspirational than fact, more fication and marketing than substance. Still SpaceX with Tesla could become an impressive company. The inflated valuation won’t be a safe investment though.

In an era with so much circular financing in AI Infrastructure and Generative AI “BigAI” startups, it’s sad to see what Elon Musk has come to and it’s also a running joke:

Business as usual for Tycoons doesn’t follow normal business rules. There’s also many other Billionaires backing projects like this for their own legacy and long-term interests.

But can Starlink and Tesla’s energy business fund the future Elon Musk hopes to see with lunar bases and Martian colonies? Will China beat him to both? It’s fairly probable. The U.S. has capital advantages and talent and R&D superiority, but that might not be enough here for mega projects that the future requires. The U.S. lacks cohesive long-term strategy and leadership that isn’t short-term. Elon Musk is 54, and increasingly unstable.

xAI was very late compared to OpenAI, Anthropic and even DeepSeek. Elon Musk is at his best when he’s pioneering technology, but that’s always going to be temporary. He’s extremely erratic, eccentric and unbalanced in his focus. Often, in too many dreamy directions. That’s not how the future is built.

SpaceX just acquired xAI, which has one of the wildest 3-year corporate timelines - but it’s also a statement of many failures. Even the geniuses with unimaginable wealth don’t always manifest the future well.

I won’t be investing in SpaceX but I will be watching the space-tech ecosystem very closely. Just as I will be watching AI, emerging tech, physical AI and quantum computing.