TLDR Elon Musk merged SpaceX with AI startup xAI, creating a company valued over $1 trillion ahead of a mid-2026 IPO targeting up to $1.5 trillion valuation SpaceXTLDR Elon Musk merged SpaceX with AI startup xAI, creating a company valued over $1 trillion ahead of a mid-2026 IPO targeting up to $1.5 trillion valuation SpaceX

What the SpaceX xAI Deal Means for Tesla (TSLA) Stock

4 min read

TLDR

  • Elon Musk merged SpaceX with AI startup xAI, creating a company valued over $1 trillion ahead of a mid-2026 IPO targeting up to $1.5 trillion valuation
  • SpaceX filed with the FCC to build a “space cloud” of up to one million satellites, roughly 100 times larger than Starlink, to support AI computing
  • Tesla sold $430 million in Megapacks to xAI in 2025 and has invested $2 billion in the AI startup
  • Full convergence with Tesla faces challenges due to valuation mismatch, with Tesla trading at 200 times estimated 2026 earnings versus SpaceX at 400 times
  • Analysts maintain a Hold rating on Tesla stock with an average price target of $393.51, implying 6.7% downside from current levels

Elon Musk has combined two of his private ventures into one massive entity. SpaceX acquired xAI to create what the company calls “the most ambitious, vertically-integrated innovation engine on (and off) Earth.”


TSLA Stock Card
Tesla, Inc., TSLA

The merger values the combined company at over $1 trillion. SpaceX plans to go public in mid-2026 with a target valuation as high as $1.5 trillion and aims to raise up to $50 billion.

xAI raised approximately $20 billion in early January at a $230 billion valuation. The three-year-old AI startup has been burning through cash quickly, spending about $9.5 billion through the first nine months of 2025.

The company is racing to compete with industry leaders like Alphabet’s Google, OpenAI, and Anthropic in the generative AI market. SpaceX’s planned IPO could provide crucial funding for xAI’s infrastructure expansion.

SpaceX recently filed an application with the Federal Communications Commission for approval to build a “space cloud” of up to one million satellites. That’s roughly 100 times the scale of Starlink, SpaceX’s current space-based broadband network.

The concept leverages solar power and the cold vacuum of space to free AI computing from Earth-based limitations. These include electricity supply constraints and cooling requirements.

Business Ties Between Musk’s Companies

Musk’s companies already do business with each other regularly. Tesla’s Grok AI is being integrated into Tesla electric vehicles, while xAI uses Tesla’s Dojo compute infrastructure.

In 2025, Tesla sold $430 million in Megapacks to xAI. This accounted for 3.4% of Tesla’s energy revenue according to SEC filings. The batteries power xAI’s data centers in Memphis.

Tesla has also invested $2 billion directly in xAI. The company disclosed this investment during its fourth-quarter earnings call.

Past transactions include Tesla selling car parts and solar equipment to SpaceX. Tesla also used SpaceX resources to develop a special Cybertruck alloy.

Valuation Challenges for Full Convergence

Some Tesla investors hope for complete convergence across Musk’s AI ventures. However, significant obstacles stand in the way.

Gary Black, co-founder of Future Fund Active ETF, points to a valuation mismatch problem. Tesla trades at approximately 200 times estimated 2026 earnings.

SpaceX trades closer to 400 times earnings at its current $800 billion valuation. The math would require Tesla to issue roughly 35% more shares to combine the companies at existing valuations.

The combined SpaceX-xAI entity could face antitrust scrutiny. Musk controls 13% of Tesla, and the company already faces regulatory battles including spectrum disputes with the FCC.

Tesla’s fourth-quarter earnings call focused heavily on AI opportunities. These include robotaxis and Optimus humanoid robots, positioning Tesla as an AI company rather than just a car manufacturer.

Analysts remain cautious on Tesla’s prospects. The company faces sluggish EV sales and execution challenges.

On TipRanks, Tesla has a Hold consensus rating based on 11 Buy ratings, 12 Hold ratings, and seven Sell ratings. The average Tesla price target stands at $393.51, implying 6.7% downside potential from current levels.

Tesla stock dropped 2% on Monday while the S&P 500 and Dow Jones Industrial Average gained 0.5% and 1.1% respectively. Weak Chinese vehicle sales data may have weighed on investor sentiment, with Chinese EV leader BYD shares dropping 6.9% in overseas trading.

The post What the SpaceX xAI Deal Means for Tesla (TSLA) Stock appeared first on CoinCentral.

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