Musk`s space company SpaceX is actively weighing merger options with Tesla (TSLA) or with xAI.

This is a deliberate move to compress Elon Musk’s empire into fewer, heavier pieces ahead of a public offering that could value SpaceX near $1.5 trillion.

Two merger subsidiaries have already been created.

Financing conversations are underway. This is real.

The idea on the table is simple. Either SpaceX absorbs Tesla, or it absorbs xAI, or it sets the terms so tightly that functional separation stops mattering.

Investors are already nudging toward the Tesla option. SpaceX has also explored folding in xAI before an IPO, potentially swapping xAI stock for SpaceX stock. Musk is clearly testing which configuration produces the biggest pull for capital.

The headline excuse is synergy. SpaceX wants orbital data centers powered by solar energy. xAI wants massive compute. That is also one of the reasons why Tesla invested addtional $2 Billion in xAI. Tesla brings batteries, energy storage, robots, and manufacturing discipline. There is also talk of using Starship to haul Tesla’s Optimus robots to the Moon and Mars. That all sounds futuristic.

The disruption behind the news: This is about building an integrated space, energy, and compute monopoly.

If SpaceX merges with Tesla, Musk controls launch, satellites, energy storage, robotics, and distribution of capital intensive hardware under one roof.

If SpaceX merges with xAI, he locks advanced AI directly to proprietary orbital infrastructure that competitors cannot touch.

SpaceX is targeting up to $50 billion in IPO proceeds.

With that kind of funding, SpaceX can subsidize Starship launches until competitors collapse. Blue Origin and smaller launch players cannot match that burn rate.

Traditional data center operators cannot compete with subsidized orbital compute if even 5 to 10 percent of high value AI workloads migrate off Earth over the next decade.

For Tesla stockholders, a merger flips the story. Tesla stops being valued as a car company with AI dreams and starts being treated as hard infrastructure inside a space backed ecosystem. This is another hint that Tesla is shifting its strategy toward AI and robotics.

That can justify a valuation reset even if vehicle margins stay flat. For xAI, this is existential. Without guaranteed access to compute, xAI is just another AI lab burning cash against OpenAI and Google. With SpaceX, it becomes the only AI company with sovereign infrastructure in orbit.

There is also a regulatory angle that matters. Space based data centers dodge local power constraints, zoning fights, and in some cases national regulation. That is a structural advantage. Governments will react, but only after deployment is real.

What to watch next

First, watch timing.

If SpaceX files for an IPO before summer, the merger decision will come first. Public markets complicate empire building. Musk knows that.

Second, watch capital structure.

Any deal that requires large new financing tells you which side has leverage. If Middle Eastern sovereign funds show up early, expect the most aggressive version of this plan.

Third, watch talent movement.

If senior xAI engineers start showing up inside SpaceX programs, the decision is already made.

SpaceX merger is about locking up the future stack of energy, compute, and access to space before anyone else can react. If Musk pulls this off, the real space race begins.