Another day, another deal for Elon Musk – this time the small matter of creating a $1.25 trillion (£900bn) firm by merging two of his existing ones together.
SpaceX – the company which sends out rockets, provides wifi by satellite and wants to eventually colonise Mars – has now essentially enveloped the activities of xAI, an artificial intelligence-focused businesses which owns Grok, as well as the social media platform X and one of the biggest supercomputers on the planet called Colossus.
The end result is a privately-owned business which is likely the most valuable on the planet. But it may not be so for long – not because another will usurp it, but because Mr Musk wants to float SpaceX on the stock market later this year. The move will enable new investors to own a piece of the wide-ranging pie, while allowing existing ones to take a return on investments made along the way.
The unification of ‘MuskCorp’
SpaceX buying xAI for $250bn is not the first time that Musk has joined together his ventures.
Only last year, X (or Twitter if you still prefer it) was bought up by xAI for $45bn, including $12bn of debt.
It is something of a change of pace from his previous choice, where for example The Boring Company – a venture which digs and makes superloops and other transport passages underground – was spun out to a separate company from within SpaceX, back in 2018.
He also remains CEO of another standalone firm founded in 2016, the brain implant company Neuralink.
That might not be the end of the grouping together of the businesses that the richest man on the planet leads, with Tesla – itself a $1.6tn (£1.16tn) company listed in the US – also part of the equation.
“Elon Musk has a clear ambition to bring all his companies under one umbrella. The merger is a big step in this direction,” said Chris Beauchamp, chief market analyst at IG.
“It is highly likely that Tesla and the SpaceX group will find themselves combined in due course once the latter has listed, consolidating Elon as not just one of the wealthiest men in the world but also one at the forefront of technological progress.”
Russ Mould, investment director at AJ Bell, suggested a Tesla-SpaceX combination could even mean the latter might not need to go public. “Speculation about a further combination with Tesla to build an effective MuskCorp, which could remove the need for a SpaceX IPO, has been bubbling away even if it looks like plans for the latter’s launch on the stock market are well advanced,” he said.
SpaceX: The giant IPO question
It is almost certain that SpaceX will in fact float and, if it does so, it could well be the biggest in history, outstripping Saudi Aramco’s near-$30bn raise from 2019. Some reports have estimated SpaceX could generate closer to $50bn.
Whatever the value, it adds kudos and further renown to one of the most famous names in industry, particularly given the future-looking aspect of SpaceX with its visions of data centres in space and people on other planets.
It also makes future sense from a business perspective, says Emma Wall, chief investment strategist at Hargreaves Lansdown– but a longer-term requirement than is usual will be placed on those wanting to buy shares.
“Musk announced during Tesla recent results that he would be pivoting the business away from electric vehicles to automation and artificial intelligence, and this will be true of his space travel ambitions too, meaning there are technological synergies to be made across all his businesses,” she said.
“What will be key is the market’s view of the valuation. While Musk has a proven track record of delivery, he is a divisive figure and will be asking the market to value a company based on a multi-decade vision, where most CEOs operate a three to five year business cycle.”
However, investing in companies is not intended to be entirely speculative and even some of Musk’s more earth-bound companies, like EV manufacturer Tesla, has critics when it comes to future income versus current ideas.
Much of the revenue generated by SpaceX right now comes from the Starlink satellite network, a big draw for potential investors to get hold of.
However, how much they are willing to pay to now also have to take on board other aspects of the bigger company is up for question.
Criticism and concerns
An initial question for investors, for example, might be that they want to buy into rocket launches and humungous piles of data, but how much do they want to buy into an AI model which has come under intense criticism lately for reportedly creating millions of sexualised images, including when told consent was withheld, and is being investigated by UK regulators?
What about investing in the social media platform hosting those images, which itself is being investigated by Paris officials over deepfakes and worse?
In an all-under-one-umbrella setup, there is no choice to split that preference.
“For all the grand talk of creating an ‘innovation engine’ and engaging in space-based AI, some investors may feel the xAI deal affects the prospective appeal of SpaceX. The real moneymaker for this business is the Starlink satellite internet business rather than the higher profile space rocket arm,” said Mr Mould.
“The ownership of xAI, as well as further diluting exposure to Starlink, could be seen as exposing SpaceX to negative headlines and regulatory action given the recent controversies around Grok being used to create inappropriate images.”
Aside from those regulatory issues, there’s a more specific question around whether buyers believe in space industries, artificial intelligence or both, and whether they’d want to have to have them grouped together in the same company rather than valuing them on their own respective merits.
And yet, betting on Musk has previously proven lucrative for big investors, and, in the long run, correct for multiple companies’ progression.
For James Bruegger, chief investment officer at Seraphim Space, a company which invests in others around the tech and space intersection, there’s simply a one-way journey to the future and it’s one where both industries are merged just as much as xAI and SpaceX now are.
“The impact of space technology will be every bit as profound as AI,” he said. “Space is already an essential layer of global infrastructure, and as AI continues to grow exponentially, the two domains will become inseparable.
“Space will underpin every sector of the global economy, from defence, connectivity and climate intelligence to next‑generation compute. This deal is a powerful signal that the future of AI will be built in orbit.”
