This is the first draft of the largest deal in history.

Reuters broke the story exclusively on Friday: SpaceX and xAI are in advanced merger talks ahead of a planned public listing that would dwarf any IPO the market has ever seen. Bloomberg confirmed the scoop hours later, adding that Elon Musk is personally driving the negotiations to combine his rocket company and his artificial intelligence startup into a single mega-entity.

TechCrunch then raised the stakes: a three-way deal involving Tesla has reportedly been discussed, though those talks are at an earlier stage.

The numbers are staggering. SpaceX commands a private market valuation of roughly $350 billion. xAI, the company behind the Grok chatbot that just won Pentagon approval for classified military systems, is valued at $120 billion. A straight merger creates a combined entity worth $470 billion — before the IPO premium.

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Elon Musk reportedly plans to merge SpaceX with xAI ahead of IPO

The Empire Strikes Back

This isn't just a financial merger. It's the final consolidation of Musk's industrial base. SpaceX brings the rockets, the satellite constellation, and a fast-growing Pentagon contracting business that's already competing for $5 billion+ in defense contracts — autonomous drones, Starlink military applications, and space-based AI infrastructure.

xAI brings the brain. Grok was recently approved by the Pentagon for classified military systems, a massive competitive moat in the AI arms race. Combined with SpaceX's launch capabilities, the merged entity would be the only company on Earth that can build, launch, and operate AI-powered space assets end-to-end.

One source told Reuters the combined company could target a $1 trillion+ valuation post-IPO, which would make it one of the most valuable public companies on day one.

The RKLB Sympathy Trade

For public market investors who can't buy SpaceX directly, the ticker to watch is $RKLB. Rocket Lab is the closest publicly traded pure-play space company, and the SpaceX IPO halo is already driving the stock.

$RKLB trades at $135.76 with a market cap of approximately $78.6 billion. Revenue growth sits at 63.5% YoY — impressive by any standard. But here's the catch: the mean analyst target is ~$100.84. The stock is trading well above that, propelled entirely by the gravitational pull of the SpaceX narrative.

That's the halo effect in action. Every piece of positive SpaceX news lifts the entire space sector, and this merger-IPO combo is the biggest catalyst the industry has ever seen.

What the Combined Entity Looks Like

Run the math on what this merger creates:

SpaceX: Reusable rockets, Starlink with millions of subscribers generating over $3.25 billion in quarterly revenue, a human spaceflight business, and the Starship program targeting Mars.
xAI: Grok, the AI model that just cracked the Pentagon's classified clearance wall — a feat that effectively makes it the default AI provider for a massive slice of US military spending.
Starlink + AI: Satellite internet is the perfect distribution channel for edge AI inference. Starlink terminals become AI endpoints. Every Starlink user is a potential Grok subscriber.

The vertical integration is the story. No other company — not Amazon (Kuiper + AWS), not Google — can match the hardware-to-software pipeline Musk is assembling.

The Pentagon Factor

The timing is not accidental. The Pentagon recently granted xAI's Grok approval for classified military systems, a clearance that opens the door to billions in defense contracts. SpaceX already has deep ties to the Department of Defense through Starshield and National Security Space Launch contracts.

Together, SpaceX-xAI becomes the undisputed prime contractor for the space-based AI defense stack — satellites, launch, ground infrastructure, and the AI that runs on all of it. Competitors like Lockheed Martin and Northrop Grumman are suddenly playing catch-up in both space and AI.

The IPO: Largest in History

If this merger goes through and the combined entity lists, it will be the largest IPO in market history — eclipsing Alibaba's $25 billion record by a wide margin. The scale is unprecedented: a rockets-to-AI conglomerate with government contracts, consumer revenue, and a charismatic founder-CEO who commands the largest retail investor following on earth.

The question isn't whether the IPO will be massive. The question is whether the combined entity can execute on the integration. Merging a hardware-heavy aerospace company with a fast-moving AI startup is a cultural and operational challenge that makes most tech mergers look simple.

But if anyone can pull it off, it's the guy who taught rockets to land themselves.

For public market exposure to the space-AI convergence thesis, $RKLB remains the most liquid and direct proxy — though investors should note that the stock is already pricing in a significant SpaceX premium above analyst targets.