xai is reportedly in merger discussions with SpaceX as the pair explore a combination that could precede an initial public offering, as reported by Reuters.
Reuters said shares of xai would be exchanged for shares in SpaceX under the proposed deal and that two entities were set up in Nevada on January 21 to facilitate the transaction.
Elon Musk has pitched putting AI data centers into orbit, saying at Davos that the lowest cost place to put AI will be in space, and that would be true within two years, maybe three at the latest.
The orbit plan aims to harness solar power and reduce cooling costs, though industry analysts and executives described the idea as risky and questioned whether savings would justify the investment.
Corporate Moves And Controversies Around xai And Tesla
Tesla disclosed in its Q4 2025 earnings report that it agreed on January 16, 2026 to invest about $2 billion to acquire Series E Preferred Stock of xai as part of a publicly disclosed financing round.
The company said xai announced earlier this month that it raised $20 billion in its Series E round, valuing the company at approximately $230 billion, and that Tesla’s $2 billion represented 10 percent of that round but less than 1 percent of xai.
Tesla noted the investment was made on market terms consistent with other investors and that a framework agreement will guide potential AI collaborations between the two companies.
The disclosure came alongside sweeping shifts at Tesla, where CEO Elon Musk said the automaker would end the Model S and Model X programs and repurpose factory space to build Optimus robots, aiming to produce up to 1 million units per year at the Fremont plant.
On the earnings call Tesla reported $24.9 billion in revenue versus $24.8 billion estimates and said revenue fell 3 percent year over year in the fourth quarter, while shares rose about 1.8 percent in after-hours trading.
Executives said Tesla operated 500 robotaxis across Austin and San Francisco and that randomly selected paid rides without a safety driver are taking place in Austin, though the company described fleet deployment as an early phase.
CFO Vaibhav Taneja said Grok, xai’s chatbot, is already in use across Tesla’s fleet, and he cautioned that early deployment makes revenue and cost per mile metrics not meaningful to discuss.
Separately, shareholders filed a lawsuit in June 2024 alleging Elon Musk breached his fiduciary duty when he founded xai, and reporting noted xai is burning through about $1 billion a month while competing with other frontier AI models.
