Elon Musk’s SpaceX is preparing for a blockbuster initial public offering, set to be among the largest ever. Ahead of a potential June listing, the company acquired xAI, Musk’s artificial intelligence startup.
SpaceX, which includes both spacecraft and satellite internet through its Starlink segment, was reportedly valued at US$1 trillion during the merger. xAI was valued at $250 billion.
However, xAI could prove to be an issue for SpaceX as it makes its stock market debut, as it is rapidly burning through cash, struggling to keep up with rivals in the AI sector, and under investigation for its chatbot’s harmful and bigoted output.
SpaceX IPO pending
SpaceX is gearing up for an initial public offering. Its valuation could be more than $1.75 trillion, per Bloomberg, which would make it one of the largest IPOs in history and among the most valuable companies worldwide.
The IPO could raise more than $75 billion, according to The Information. SpaceX reportedly confidentially filed for its IPO earlier this week, with a listing likely in June.
The company has also reportedly been interviewing banks such as Goldman Sachs, JPMorgan Chase, and Bank of America as potential IPO leaders.
SpaceX generated almost $16 billion in revenue and $7.5 billion in EBITDA last year, Morningstar has estimated. This was largely due to major subscriber growth at Starlink.
xAI's integration into SpaceX
xAI was integrated into SpaceX in February and is now a wholly-owned subsidiary. The two businesses’ operations have remained separate, however, as SpaceX is subject to distinct export control rules.
“By merging with xAI before going public, SpaceX transforms its investor narrative from ‘rockets plus internet’ into 'AI plus space-infrastructure platform,’” wrote Pitchbook analysts. “Even if investors heavily discount the out-year AI options, platform narratives materially influence earliest IPO demand and valuation scaffolding.”
Musk has also claimed that adding xAI to SpaceX could facilitate building AI data centres in space. “In the long term, space-based AI is obviously the only way to scale,” he wrote when announcing the merger.
However, the merger comes amid significant financial issues for xAI. At least half of xAI’s $90 million gross profit in the first nine months of 2025 stemmed from Musk’s other companies, Bloomberg has estimated, and its burn rate has reportedly reached around $1 billion per month due to the high costs of AI infrastructure and model training.
xAI had similarly merged with X (formerly Twitter) in 2025 amid X’s major financial struggles. At the time, X’s revenue had fallen by almost half from 2022, when Musk purchased the social media network.
Musk has also sought to strengthen ties between his companies ahead of the SpaceX IPO. In March, Tesla converted its investment in xAI into a stake of less than 1% in SpaceX, and SpaceX had reportedly considered a potential merger with Tesla before absorbing xAI.
xAI's model trouble
As well as its faltering finances, xAI’s models are currently being overhauled, and its Grok AI chatbot is being investigated for creating massive numbers of harmful posts.
xAI is undergoing major restructuring as its models have fallen behind its rivals in the sector. Cofounders Tony Wu, Toby Pohlen, and Jimmy Ba left the company in February, with almost a dozen other employees working on Grok also departing early this year.
Musk then ordered another series of layoffs in March and reportedly deployed managers from SpaceX and Tesla to audit xAI employees’ work. The company has been concerned about low-quality training data for its AI models, which has caused its coding offerings to lag those from OpenAI or Anthropic, per the Financial Times.
“xAI was not built right first time around, so is being rebuilt from the foundations up,” wrote Musk.
The business is also being investigated by U.S. state authorities for creating harmful deepfake images. At least 37 U.S. attorneys general are taking action against xAI after users made millions of sexualised deepfakes with Grok
“For several years, both states and industry members have worked to curtail so-called ‘nudify’ tools. These AI tools have been sought out by some internet users to embarrass, intimidate, and exploit people by taking away their control over how their bodies and likenesses are portrayed. Grok was not only enabling these harms at an enormous scale but seemed to be actually encouraging this behaviour by design,” 35 state attorneys general wrote in an open letter.
A group of teenagers similarly sued xAI in March, alleging Grok’s AI image generation tools produced and distributed child sexual abuse images.
X is also investigating bigoted and vulgar posts made by Grok, Sky News reported in March. Grok repeatedly made racist and antisemitic posts on the platform last year after an update that Musk claimed “improved Grok significantly”.
