Elon Musk has just completed a move that could change the landscape of global capital markets: merging xAI into SpaceX. This merger not only creates a super giant valued at up to $1.25 trillion but also directly boosts Musk's personal net worth to $850 billion.
However, for investors, this is not just a numbers game. UBS pointed out in its latest research report on February 4 that this marks the beginning of the &#34;orbital AI&#34; era, which involves moving data centers into space. But this deal also fundamentally alters the previously clear investment logic of SpaceX: investors will no longer face a pure space infrastructure champion generating strong cash flow, but will be forced to accept a hybrid of &#34;space + AI&#34;—not only needing to assess SpaceX's operational strength but also to bear the astonishing capital expenditures of xAI. With an IPO potentially reaching $50 billion approaching, this narrative shift will be a core risk and opportunity that all institutional investors must reassess.
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<h2>Reconstruction of the Trillion Empire: Musk's &#34;Ultimate Bet&#34;</h2>
According to UBS analysis, as early as September 2024, the market predicted that Musk would become the world's first trillionaire by 2027 through his &#34;space race bet.&#34; Now, this prediction seems to be accelerating towards reality. Earlier this week, Musk swiftly took action to merge xAI into SpaceX through an all-stock transaction.
UBS trader Jephine Wong detailed the valuation logic of this deal in a report to clients: The merged entity is valued at approximately $1.25 trillion, with SpaceX valued at about $1 trillion and xAI valued at around $250 billion.
In contrast, former WeWork CEO Adam Neumann once boasted in 2019 that he would become the first trillionaire, but now he can only watch as Musk's empire leaves him behind. By exchanging shares at a price of $526.59 per share for SpaceX, as shown in internal documents, Musk not only integrated his business empire but also built a behemoth on a financial level. But this is not a simple addition; it is a clear strategic signal: SpaceX is planting the flag of AI in the space domain.
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<h2>Orbital AI: From Science Fiction to Capital Story</h2>
UBS emphasized in its research report that the core selling point of this deal is &#34;orbital AI.&#34; Musk is not satisfied with the competition for computing power on the ground; he bets that within the next 2 to 3 years, a substantial share of computing power—essentially space data centers—will operate in low Earth orbit
To support this grand narrative, the company has submitted a staggering application to the Federal Communications Commission (FCC), seeking approval to launch up to 1 million satellites aimed at computational capabilities. UBS pointed out that this strategy of folding xAI into SpaceX is intended to leverage the dominance of low Earth orbit to dominate the next generation of AI computing. This is a bold storyline for the potential IPO set to launch this summer or fall, attempting to convince investors that the lowest-cost AI computing will be realized in space.
<h2>Financial Reality: The Game of Cash Flow and Money Burning Machines</h2>
However, stripping away the grand vision, UBS advises investors to focus on the harsh realities behind the financial statements. This merger introduces significant financial complexity, bundling a &#34;cash printing machine&#34; with a &#34;money burning machine.&#34;
According to data provided by UBS, SpaceX's current financial situation is extremely healthy, primarily benefiting from the support of approximately 9 million Starlink users and its absolute dominance in the global launch market. It is expected that SpaceX's revenue will reach $15 billion to $16 billion in 2025, generating about $8 billion in EBITDA (earnings before interest, taxes, depreciation, and amortization). This was originally a perfect, profitable IPO story.
In contrast, xAI's financial situation is entirely different. UBS's data shows that xAI generated only about $210 million in revenue in the first nine months of 2025, but its cash burn rate was as high as $8 billion to $9.5 billion. Even after raising over $20 billion (including $2 billion from Tesla), xAI's current cash burn rate is still close to $1 billion per month. UBS analysts pointedly noted that this merger is essentially using SpaceX's operational muscle to support xAI's enormous capital expenditure appetite.
<h2>IPO Prospects and Investor Divergence</h2>
Currently, management states that this deal will not disrupt the 2026 listing timeline, and the company still plans to push for an IPO this year, having begun outreach to cornerstone investors, with a target fundraising amount potentially reaching $50 billion. However, the narrative logic of the roadshow has fundamentally shifted.
UBS analyst John Hodulik pointed out that market reactions have already shown signs of investor anxiety. The stock price of EchoStar, which holds about 3% of SpaceX-related assets, fell after the merger news broke, indicating that not everyone is convinced by the &#34;orbital AI&#34; story. Current investors face a new dilemma: what was once a clear investment in space infrastructure has turned into a complex mix that needs to balance strong operational cash flow with AI scaling capital investments.
This is not just about expanding opportunities; it is also about complicating the narrative. As UBS asked: with a historic IPO on the horizon, does xAI truly possess undiscovered advantages in the market? Or is this merely a means to package high-risk assets into quality assets before the listing? In this new narrative of &#34;Space × AI,&#34; investors must make their own judgments in this trillion-dollar gamble

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UBS pointed out that the merger between SpaceX and xAI officially marks the beginning of the "orbital AI" era, with its core being the deployment of data centers in near-Earth orbit. Musk bets that within the next 2-3 years, substantial computing power will shift from the ground to space, which is not only a leap in technological pathways but also attempts to redefine the geographical and cost boundaries of AI computing power

- Elon Musk has merged xAI with SpaceX, creating a supergiant valued at $1.25 trillion and raising his net worth to $850 billion.  
- This integration opens a new "orbital AI" era, transforming SpaceX's investment narrative, compelling investors to evaluate both operational strength and xAI's significant capital expenditures.  
- As SpaceX prepares for a potential IPO, investor sentiment is mixed, with concerns emerging about balancing strong cash flows with the financial complexities introduced by xAI's heavy losses.

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What does the merger between SpaceX and xAI mean? UBS: It opens the "Orbital AI" era