SpaceX Acquires xAI, The Finale of "Muskonomics"

Original Author: Kuli, Shenchao TechFlow

On February 2nd, SpaceX announced the acquisition of xAI.

The post-merger valuation is $1.25 trillion, bringing Musk's rockets, Starlink, 𝕏 platform, and Grok all under one roof.

In the official statement, Musk called the new company "the most ambitious vertically integrated innovation engine on and off Earth."

However, public data shows that xAI's revenue last quarter was $107 million, with a net loss of $1.46 billion. It burned through nearly $10 billion in cash over the first nine months, averaging close to $1 billion per month. Meanwhile, SpaceX's profit for 2025 is approximately $8 billion.

A company burning $1 billion a month is being placed inside a company making $8 billion a year, all in preparation for an IPO aiming to raise $50 billion.

For xAI's shareholders, this deal has a more practical name: a lifeline.

Shuffling Assets

This isn't the first time Musk has moved assets between his companies.

In March 2025, xAI acquired 𝕏. Musk gave the merger a valuation of $113 billion, widely considered an overvaluation as 𝕏's ad revenue never recovered to Twitter-era levels. The key to this deal wasn't 𝕏's price tag; it was the real-time data generated by 600 million active users, all funneled into Grok's training pipeline. This is xAI's biggest exclusive resource compared to OpenAI and Anthropic.

In January 2026, Tesla invested $2 billion in xAI's Series E funding round. The rationale was deep integration of Grok's capabilities, needed for both the vehicle infotainment system and Optimus robot training. Tesla shareholders voted last year on whether to invest in xAI; while the "yes" votes outnumbered the "no" votes, the board ultimately didn't approve it. This $2 billion investment has now materialized.

On February 2nd, SpaceX acquired xAI. Because Tesla holds xAI shares, it now indirectly holds a minority stake in SpaceX post-merger.

On xAI's side, it spent hundreds of millions of dollars over the past year purchasing Tesla's Megapack battery systems to power its Colossus supercomputing center. Tesla, in turn, purchases Starlink services from SpaceX for vehicle connectivity.

𝕏 has become the "dowry" within Musk's business empire. First, it was married off to xAI in exchange for algorithmic legitimacy. Now, it's entering SpaceX's household along with xAI, all to complete the final narrative piece for that massive $1.25 trillion check ahead of the June IPO feast.

Money and people circulate among Musk's companies. Investor circles have a term for this system: Muskonomy.

Ross Gerber, an investor in both Tesla and xAI, put it bluntly: "It's like a bunch of overvalued companies merging into a bigger overvalued mess, run by Elon. But on the other hand, it's now a pure Musk concept stock. Want to invest in Elon? Here you go, it's all in one."

In a public company system, a single controller transferring assets and contracts between related entities typically invites regulatory scrutiny. But Musk's companies are almost all private. There's no obligation for public financial disclosures, no independent boards for checks and balances, and shareholders are a small group of VCs and sovereign wealth funds who don't scrutinize things like public shareholders would.

As long as the companies remain private, this game of shuffling assets can continue.

But after the IPO, the story changes.

xAI's Life-or-Death Crisis

Why would SpaceX swallow xAI?

Strip away the grand space narratives, and the core reason is one: emergency rescue.

$1 billion per month—that's xAI's current burn rate.

$33 million per day, $1.4 million per hour, $23,000 per minute. By the time you finish reading this sentence, xAI has burned another $60,000.

Where does the money go? The vast majority is poured into Colossus, xAI's supercomputing cluster built in Memphis, Tennessee. It currently houses computing power equivalent to over 200,000 Nvidia H100 GPUs, targeting a power draw of 2 gigawatts. Just procuring chips and batteries has devoured tens of billions of dollars. Additionally, equity incentive expenses in the first nine months were nearly $160 million—the price tag of the AI talent war.

But on the revenue side, there's almost no growth matching this burn rate.

xAI's projected revenue for full-year 2025 is about $500 million, primarily from Grok API calls and 𝕏 Premium subscription revenue sharing. Management's guidance to investors is for revenue to grow to $2 billion in 2026 and achieve profitability in 2027.

$2 billion in revenue sounds like a lot, but OpenAI's annualized revenue for 2025 already exceeds $20 billion. Even if xAI hits its target, its scale would only be one-tenth of OpenAI's.

Founded less than three years ago, xAI's valuation skyrocketed from $0 to $250 billion, undergoing at least six funding rounds.

The most recent round was the $20 billion Series E in January this year, with investors including Nvidia, Valor Equity Partners, and the Qatar Investment Authority. Combined with the $5 billion debt financing arranged earlier by Morgan Stanley, xAI has raised over $40 billion cumulatively.

A company losing billions annually with $500 million in revenue, carrying a $250 billion valuation, equates to a price-to-sales ratio of 500x.

If it went public alone, the secondary market would struggle to accept this valuation.

A pattern emerged in the 2025 US IPO market: Almost all companies traded below their last private funding round valuation post-listing.

Compared to xAI, SpaceX's situation is the complete opposite.

It might be one of the world's most profitable private companies. It's the only US commercial rocket company capable of routinely sending astronauts to the International Space Station. Starlink's revenue has already surpassed its rocket launch business and is recurring revenue. 9 million paying users, paying monthly. This is the business model the secondary market loves most.

But SpaceX going public alone also has issues.

Wall Street's valuation logic is brutal: rocket companies are valued on cash flow, AI companies sell imagination.

Referencing traditional aerospace giant Lockheed Martin, the market gives it a P/E multiple consistently in the 20-30x range. Even giving SpaceX, the king of unicorns, a 50x "hardcore tech premium" based on its 2025 $8 billion profit, its market cap would hover around $400 billion. Even with a 100x P/E "new space economy" premium, it's only an $800 billion market cap.

But AI companies? OpenAI, while still loss-making, is seeking a new round valuation of $830 billion. Anthropic is valued at $350 billion.

Musk wants over $1 trillion.

Therefore, the financial logic behind the SpaceX-xAI merger isn't complicated: xAI alone can't sustain its valuation. SpaceX's profits provide a backstop. Packaged together, they become a combination "with profits, a growth story, and moats."

For IPO underwriters, this is much easier to sell than selling them separately.

But Musk still needs a narrative to convincingly package a rocket company and an AI company together.

So he found one: Space-based Data Centers.

The New IPO Story: Space-Based Data Centers

Musk wrote a paragraph in the merger announcement: "AI advancement relies on large ground-based data centers, requiring massive electricity and cooling. The global AI power demand simply cannot be met by ground-based solutions, and even in the short term, it places burdens on communities and the environment."

There's an ironic background to this statement. xAI's Colossus supercomputing center is built in Memphis, where local communities have been protesting its pollution issues. The NAACP and environmental groups are preparing lawsuits.

Musk says ground data centers burden communities; his own data center is a case in point.

His proposed solution is to move computing power to space.

Powered by solar energy, launched by SpaceX rockets, transmitting data via the Starlink satellite network.

Last Friday, SpaceX filed an application with the FCC requesting authorization to launch up to 1 million satellites to support its "orbital data center" plan.

"I estimate that within two to three years, the lowest-cost place for generative AI compute will be in space," Musk said at Davos last month.

This vision is grand and very early-stage.

Currently, no company operates a data center in space. All of xAI's computing power is on the ground. Jeff Bezos's Blue Origin has announced a similar space backbone network plan. Google has a space data center research project called Project Suncatcher. All remain conceptual.

But an IPO doesn't need a finished product; it needs a story big enough.

SpaceX alone: the story is rockets and Starlink. It's good, but the growth ceiling is visible. The global commercial launch market is only so big, and Starlink user growth will eventually saturate. Add xAI, and the story becomes "AI + Space Infrastructure"—a trillion-dollar narrative.

Add the space data center vision, and the narrative becomes "The future of human computing is in orbit, and we are the only company with rockets to send it up there."

For underwriters and roadshow PowerPoints, the difference between these three nested layers is immense.

As for when space data centers will be operational, that's a problem for after the IPO.

If space data centers are feasible, xAI would possess infrastructure advantages unreplicable by other AI companies. OpenAI rents Amazon Web Services and shares profits with Microsoft; Google negotiates power supply with state governments and faces environmental reviews. Musk wouldn't need to; he'd have his own cloud, running in space.

From rocket launches (SpaceX) to satellite networks (Starlink) to data training (xAI) to content distribution (𝕏 platform) to application scenarios (Tesla autonomous driving, Optimus robots), the entire industrial chain is under Musk's control.

Tesla Shareholders: The "Gas" on the Road to Mars

In this capital game, there's an invisible loser: Tesla shareholders.

Complaints within the Tesla shareholder community have reached a peak. Multiple investors questioned on social media: In 2020, Musk hinted that Tesla shareholders would have priority subscription rights for SpaceX. But after xAI's founding in 2023, Tesla's AI team was poached by xAI, and computing resources were diverted to xAI. Now, Musk is asking Tesla to invest $2 billion in xAI, forcing Tesla shareholders to indirectly hold stakes at SpaceX's $1.5 trillion and xAI's $250 billion valuations.

One investor did the math: When promised in 2020, SpaceX was valued at $100 billion; now it's $1 trillion—a 10x increase. When xAI was founded in 2023, its valuation was $10 billion; now it's $250 billion—a 25x increase. The "priority subscription right" has become a "right to buy at peak prices."

Tesla itself is running low on cash. It has $44 billion in cash on hand, but its automotive business has seen declining sales for two consecutive years. This week, Tesla announced a $2 billion investment in xAI and plans to double its capital expenditures. Wall Street analysts predict that due to massive AI infrastructure investments, Tesla could face a cash flow deficit of $5-7 billion in 2026.

The timeline is telling:

• December 2025: xAI completes $20 billion funding round, valuation $230 billion
• January 2026: Tesla announces $2 billion investment in xAI
• January 30, 2026: SpaceX applies to launch 1 million satellites
• February 2, 2026: Announces acquisition of xAI

A series of moves within 60 days. Musk is playing a grand game of chess; Tesla shareholders aren't on the board—they're the chips.

In Musk's "Muskonomy" system, resources flow among companies, each transfer creating new valuation highs.

But Tesla shareholders find their technology siphoned away, their funds diverted, only to "buy back" these assets indirectly at valuations far higher than originally promised.

On the other hand, Tesla will benefit from Musk's and SpaceX's success, becoming a pure SpaceX concept stock.

A fitting analogy:

"Tesla shareholders now resemble an ex-spouse whose savings were taken by their former partner to start a business. While cursing Musk for being unprincipled and misappropriating funds, when they see the ex (SpaceX) is actually about to pull off a $1.5 trillion super IPO, they can't help but rush to reconcile, hoping to secure a family seat on that ticket to Mars. A complex mix of Stockholm syndrome and greed."

The Evolution of the Musk Methodology

Musk wrote a mission statement for the merged company: "To create a conscious sun to understand the universe, extending the light of consciousness to the stars."

This sentence hides the underlying logic behind everything Musk does: using a vision so grand it's unfalsifiable to turn immediate financial problems into long-term narratives.

SpaceX survived its early days the same way. When rockets blew up three times in a row and the company nearly went bankrupt, it was the vision that "humans must become a multi-planetary species" that sustained its valuation.

Now, this methodology has been upgraded.

Instead of telling one story with one company, bundle all companies together to tell an even bigger story.

Rockets handle transportation, Starlink handles transmission, xAI handles intelligence, 𝕏 handles data, Tesla handles energy and robots... Each piece has flaws on its own, but pieced together into the vision of a "spacefaring AI civilization," the flaws become "parts not yet realized."

Musk discovered a secret: In the private company stage, valuation is primarily driven by narrative. As long as the story is big enough and far enough away, investors are willing to believe. SpaceX's valuation grew from a few billion to $800 billion, Tesla from near-bankruptcy to $1.6 trillion—both followed this logic.

But a single company's narrative always has a ceiling. Rockets can only go as far as Mars, electric vehicles as far as autonomous driving. Once the ceiling is hit, valuation growth stalls.

The solution: Link the narratives of all companies to construct a super-narrative.

In this narrative:

SpaceX is the "space infrastructure operator," xAI is the