Elon Musk has merged SpaceX with his loss-making AI firm xAI, creating a combined entity valued at $1.25 trillion (€1.05 trillion). As a result, SpaceX’s long-anticipated initial public offering (IPO), once a clean narrative of a profitable rocket company, has suddenly become far messier.
To Musk, this is “the most ambitious, vertically integrated innovation engine on (and off) Earth”, covering AI, rockets, satellites, free-speech platforms and, naturally, the expansion of humanity across the universe. The deal will “enable self-growing bases on the moon, an entire civilisation on Mars and ultimately expansion to the universe”.
Of course it will.
For SpaceX minority shareholders, less dazzled by Musk-mania, the transaction may look more like a rescue operation than a vision of interplanetary civilisation.
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SpaceX, which reportedly banked about $8 billion in profit on $15 billion-$16 billion in revenue last year, has absorbed a near billion-dollar-a-month cash burner in xAI, which generated just $107 million in revenue last quarter.
Past Musk manoeuvres offer a template. Tesla rescued Musk’s SolarCity in 2016, and X was merged into his AI ambitions, protecting early investors. The merger of SpaceX and xAI, then, is familiar territory, with a cash-generating Musk company propping up a riskier venture, while public investors are left to take it on faith.
Musk would disagree, citing the possibility of space-based data centres as a key rationale for merging the two companies. However, Amazon Web Services (AWS) chief executive Matt Garman says the technology needed for that is “pretty far” away at the moment.
Former fund manager George Noble is more blunt, saying it’s the “kind of thing that sounds visionary until you think about it for five seconds”.
SpaceX and xAI are “wildly different businesses with zero operational overlap”, he cautions, likening Musk’s logic to Microsoft buying a cement company and claiming it’s essential for data centres.
Of course, whether the merger makes sense on paper may be beside the point. Musk’s fans have historically bought whatever he is selling, and a SpaceX IPO might well be no different.
