Elon Musk is once again toying with the shape of his empire, and this time the stakes are bigger than a new Model 2 or a slightly smarter chatbot. SpaceX is quietly exploring a merger either with Tesla or with xAI, the AI startup behind Grok, ahead of a blockbuster IPO that could value the rocket company at well over a trillion dollars. The idea on the table is simple to describe and wild in its implications: put rockets, satellites, cars, batteries, social media, and frontier AI under fewer corporate roofs — and maybe, eventually, under just one.

The basic contours have come into focus through a flurry of big-name reporting. Reuters says SpaceX and xAI are in active talks to merge, with xAI stock being swapped for SpaceX shares, and two fresh merger entities already set up in Nevada to enable the deal. Bloomberg adds that SpaceX has also considered a more dramatic move: a combination with Tesla, Musk’s electric car and energy company. TechCrunch and others sketch out two main scenarios that insiders are gaming out — SpaceX–xAI on one side, SpaceX–Tesla on the other — with some investors actively lobbying for the Tesla tie-up. What’s missing is any clear sense of timing, valuation, or whether Musk is leaning toward one option or using both as leverage in negotiations.

What’s driving this, beyond Musk’s obvious love of scale and control, is a very specific vision of where AI should live. Musk has started saying in public that “the most cost-effective location for AI will be in space” within a couple of years, pointing to the appeal of near-constant solar power and freedom from some terrestrial bottlenecks. Through xAI, he’s already building a monster supercomputer called Colossus in Memphis to train large models like Grok, and the merger conversations are explicitly linked to using SpaceX rockets and Starlink satellites to push that compute off-planet over time. A SpaceX–xAI combination would neatly join the hardware to launch and power satellites, the Starlink network in orbit, the Grok AI model, and the X social platform that feeds it data.

Layer Tesla into this, and the picture gets even more expansive. Tesla has just committed about $2 billion to xAI, on top of already selling roughly $430 million worth of Megapack batteries to power its data centers. Tesla executives pitched that investment to shareholders as a way to avoid duplicating AI spend and to make better use of AI in its robotaxis, driver-assistance systems, and Optimus humanoid robots. Tesla is already embedding Grok into vehicles, and xAI has told investors it wants its models running inside physical robots. If SpaceX and Tesla end up under the same corporate roof, the energy-storage business that builds Megapacks suddenly sits next to the company planning space-based data centers — essentially joining EVs, grid-scale batteries, robots, rockets, and AI into one continuous infrastructure story.

On paper, all of this has a compelling internal logic. Musk has been inching toward tighter integration between his companies for years: SpaceX investing billions in xAI, Tesla following with its own multibillion-dollar commitment, xAI buying X from Musk, and Grok spreading across products from social feeds to cars. A merger could clean up that web of inter-company deals by turning them into wholly owned relationships instead of arm’s-length contracts. It could give Musk a simpler way to allocate capital where he wants — moving resources between rockets, AI chips, datacenters, and robots without having to negotiate with multiple boards and minority shareholders every time. For fans, the idea is intoxicating: a vertically integrated Musk mega-corp that designs chips, trains models, launches servers into orbit, and deploys them into cars and robots on Earth.

But the same consolidation that excites some investors will almost certainly freak out regulators, especially outside the US. xAI and Grok are already under serious scrutiny over their role in hosting and amplifying sexualized deepfake content, with EU authorities opening an investigation into how the platform handles that material. xAI also has a contract worth up to $200 million to bring Grok into US military networks, as part of a Pentagon program to accelerate decision-making with AI. SpaceX, meanwhile, is a critical defense contractor in its own right thanks to Starlink and launch capabilities. Wrap that up with Tesla’s growing robotics business and its role in transportation, and regulators are staring at a single corporate actor with influence over space infrastructure, AI models, military systems, and consumer devices. That is exactly the sort of cross-sector concentration that competition and privacy watchdogs in the EU and elsewhere have been trying to avoid.

There’s also the very human problem of governance. Tesla’s shareholders have already been uneasy about blurred lines between Musk’s companies, including his use of Tesla engineers on xAI and X projects, and the way major AI decisions seemed to hop between boards based on his preferences. A SpaceX–Tesla merger in particular would raise hard questions: Whose culture wins? How are shareholders in one company compensated relative to those in the other in any stock swap? What happens to Tesla’s identity as a car and energy company if it becomes a division inside a space and AI conglomerate? Some investors pushing for a deal are clearly betting that Tesla’s long-term story looks better if it’s reframed as an AI and robotics play riding on top of SpaceX’s infrastructure rather than a pure automaker. Others will see it as Musk trying to tighten his grip at a moment when Tesla’s core EV business is under pressure and growth is slowing.

From the SpaceX side, the calculus is different but just as consequential. The company is reportedly gearing up for an IPO as soon as mid-2026, with expectations that public markets will reward its track record of reusable rockets and the explosive growth of Starlink. Going public as a relatively clean space-and-satellites story is one thing; asking investors to buy into a hybrid of rockets, social media, and an AI lab under fire for deepfakes is another. Folding xAI in now could frontload some of that messy narrative but also bundle in a fast-growing AI asset with substantial Pentagon business and fresh funding at a very high valuation. Pairing with Tesla instead might offer a steadier, more cash-generative partner, with the bonus of tying EVs, energy storage, and space-based compute into one climate-adjacent story that public-market investors already understand.

What’s telling is that, despite all the noise, nothing is locked in. Sources quoted by Reuters and Bloomberg stress that talks are fluid, structures are still being modeled, and there is no finalized agreement or timeline regulators can point to. The new Nevada entities look like a serious step toward a SpaceX–xAI deal, but they also give Musk flexibility to pivot if investor sentiment or market conditions change before the IPO window opens. In the meantime, the companies are behaving as if the merger has already happened in everything but paperwork: capital is flowing between them, products like Grok are being embedded across Tesla and X, and joint narratives about AI in space are being hammered home in public appearances.

It’s tempting to frame this as just another wild Musk storyline. But there’s a deeper trend here that goes beyond one billionaire’s empire-building instincts. The frontier of tech is becoming less about single products and more about vertically stacked systems — data, models, chips, compute, connectivity, and endpoints all controlled by a few integrated players. A SpaceX merger with Tesla or xAI would be one of the clearest expressions of that shift: a bet that the future belongs to whoever can own the stack from orbiting data centers all the way down to the robot in your garage. Whether regulators, public investors, and even Musk’s own shareholders are ready for that kind of consolidation is the real question hanging over these merger talks — and the answer will help define not just Musk’s next act, but how much power any one tech empire is allowed to have.