According to Reuters, Elon Musk's SpaceX and xAI are in discussions about a merger to complete the integration ahead of a major IPO planned for later this year. If the merger is achieved, Musk's rocket business, Starlink satellite network, social media platform X, and Grok AI chatbot will be incorporated under the same company structure.Reports indicate that this plan will inject new momentum into SpaceX's strategy to send data centers into space. This move is significant as Musk competes with tech giants like Google, Meta, and OpenAI for dominance in the rapidly heating AI race.Musk is the world's richest person and serves as CEO of SpaceX and the artificial intelligence company xAI, which also controls his social media platform X. Additionally, he leads electric vehicle manufacturer Tesla, tunnel construction company The Boring Co., and neurotechnology company Neuralink.Under the proposed merger plan, xAI's shares will be exchanged for SpaceX shares. Sources say that two entities have been established in Nevada to facilitate the deal. Nevada company registration documents show that both entities were formed on January 21. One is a limited liability company listing SpaceX and its CFO Bret Johnsen as managing members; the other lists only Johnsen as the sole executive.It is important to note that the valuation, core motivations, or potential timeline of the deal are currently unknown.As part of the transaction, some xAI executives may be allowed to choose cash instead of SpaceX stock. However, a final agreement has not yet been signed, and the timing and structure of the deal remain uncertain.SpaceX is currently the highest-valued private company in the world, with a valuation of $800 billion in its most recent internal share transaction. Media reports have previously indicated that SpaceX plans to go public sometime this year, with an expected valuation exceeding $1 trillion, and SpaceX has arranged investment banks for the IPO.<h2>Data Centers in Space</h2>Through xAI, Musk is building a large supercomputer called &#34;Colossus&#34; for AI training in Memphis, Tennessee. Last year, SpaceX agreed to invest $2 billion in xAI as part of the startup's $5 billion equity financing.Musk stated last week in Davos, Switzerland: &#34;Putting AI in space will be the lowest-cost solution, and it will become a reality within two years, at the latest three.&#34;Solar-powered space AI computing aims to reduce the computational cost required to operate and train AI models like xAI's Grok. Meanwhile, Jeff Bezos's Blue Origin announced plans to build a high-capacity backbone network composed of thousands of satellites, while Google is also researching space data centers through Project SuncatcherHowever, building data centers in space is still considered a high-risk endeavor. Given the rapid and highly uncertain development of AI investments, some analysts and industry executives question whether the potential energy savings are enough to offset the additional costs of customizing systems for the space environment.<h2>Impact on Defense and Security</h2>Caleb Henry, an analyst at space research and consulting firm Quilty Analytics, stated that integrating xAI into SpaceX could enhance the company's competitiveness in securing significant defense contracts from the Pentagon. The U.S. Department of Defense is seeking to accelerate the application of AI in its military networks.Earlier this month, U.S. Secretary of Defense Pete Hegseth visited SpaceX's Starbase development facility in Texas and stated that xAI's language model and its chat platform Grok would be integrated into military networks as part of the Pentagon's &#34;AI acceleration strategy&#34; to expedite military decision-making and planning.xAI has secured a contract worth up to $200 million to provide Grok products to the Pentagon.Starlink and its national security version Starshield have largely relied on artificial intelligence, such as for automated maneuvers of satellites in orbit. Starshield is building a network of hundreds of classified satellites equipped with various sensors under a contract with a U.S. intelligence agency, which is expected to utilize AI to track moving targets on Earth.<h2>Latest Merger Moves by Musk's Companies</h2>This is not the first time Musk has integrated his controlled enterprises. In 2025, he merged the social media platform X into xAI through a stock swap, allowing the AI startup to access platform data and distribution channels. Earlier, in 2016, he used Tesla stock to acquire his solar company SolarCity.Earlier this month, xAI raised $20 billion in an oversubscribed Series E funding round, exceeding the original target of $15 billion, with a valuation of $230 billion. Tesla announced on Wednesday that it agreed to invest approximately $2 billion in xAI.Founded in 2002, SpaceX has disrupted the global aerospace industry with its reusable Falcon rockets and laid the groundwork for the rapid deployment of Starlink. Today, Starlink has evolved into a space broadband network composed of thousands of satellites

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This plan will inject new momentum into SpaceX's strategy to send data centers into space. As Musk competes with tech giants like Google, Meta, and OpenAI for dominance in the rapidly heating AI race, this initiative is significant

- SpaceX and xAI are in discussions for a merger ahead of a major IPO planned for later this year, potentially consolidating assets such as Musk's rocket business, Starlink, and AI initiatives.  
- The merger aims to enhance SpaceX's strategy to deploy data centers in space, amidst escalating AI competition with tech giants like Google and Meta.  
- Analysts suggest that integrating xAI may bolster SpaceX's chances for significant Pentagon contracts, as the Department of Defense seeks to accelerate AI applications in military operations.

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Report: SpaceX and xAI are in discussions about a merger, aiming to complete it before a possible IPO this year