Elon Musk waves to the crowd at the 56th World Economic Forum (WEF) Annual Meeting in Davos, Switzerland, January 22, 2026.
Dennis Bariboos | Reuters
Elon Musk’s move to combine SpaceX with the money-sucking artificial intelligence venture xAI signals a changing of the guard within his corporate empire.
tesla This is the source of much of Mr. Musk’s liquid wealth and fame. But after Monday’s merger, Tesla’s market capitalization of about $1.58 trillion is only 26% higher than SpaceX’s stated private market valuation of $1.25 trillion.
Musk owns an estimated 43% of SpaceX, while his stake in Tesla is 13%. This means SpaceX accounts for more than half of Musk’s paper wealth, which has ballooned to more than $852 billion, according to Forbes’ Real-Time Billionaires Index.
And Tesla’s corporate value has been on a downward trend since the beginning of the year, with the stock price falling 6% since the beginning of 2026. In early January, Tesla reported a 16% year-over-year drop in car deliveries, and later that month announced that its 2025 total revenue would decline 3%, marking its first annual decline on record.
Tesla’s core auto business has struggled in recent days due to intense competition from electric car makers in China and Europe and the recent removal of federal tax incentives for purchasing electric vehicles in the United States. The brand has also been hurt by Musk’s forays into politics, including cooperating with the Trump administration and supporting far-right figures in Europe.
As Tesla’s EV sales have slumped, Mr. Musk has shifted the company’s focus to ride-hailing service Robotaxi and humanoid robot Optimus, and Tesla faces stiff competition and currently has no real business.
Musk told analysts last week that Tesla will end production of the Model S and Model X as it realigns its priorities. These older models will account for less than 3% of Tesla’s annual deliveries in 2025, and the company now plans to use the lines where those models were assembled for Optimus.
A SpaceX Falcon 9 rocket carrying NASA’s IMAP mission to study the boundaries of the sun’s heliosphere and other scientific payloads prepares for liftoff at Kennedy Space Center in Cape Canaveral, Florida, September 23, 2025.
Joe Skipper | Reuters
At SpaceX, Musk has a stronger market position.
The rocket maker is a leading provider of orbital launch services through contracts worth billions of dollars annually with NASA and the Department of Defense. SpaceX also owns and operates the Starlink satellite internet service, which has more than 9,000 satellites in orbit and approximately 9 million customers, and operates a company city in Texas called Starbase.
SpaceX is reportedly aiming for an IPO this year, and the company is particularly well-positioned because business insider and former SpaceX investor Jared Isaacman is at the helm of NASA.
The merger announced Monday values SpaceX at $1 trillion and xAI at $250 billion, according to documents seen by CNBC. The deal follows a partnership between the two Musk companies last year in which xAI acquired social media platform X (formerly known as Twitter) in a stock deal.
Musk’s legions of fans, institutional investors, and even individual shareholders have come to own Tesla through platforms such as: robin hoodrefers to the collection of intertwined companies as “masconomy.”
Musk said SpaceX is acquiring xAI to develop data centers in space to escape energy constraints on Earth.
Analysts at Moffett Nathanson wrote in a note Tuesday that certain orbital data center plans proposed by SpaceX in a filing with the U.S. Federal Communications Commission would involve capital demands that are “simply enormous.” SpaceX is seeking permission to launch up to 1 million satellites as part of that effort.
“Given the required operational maturity, supply chain development, and financial requirements, we can safely conclude that, at the very least, a full-scale buildout will not occur in the foreseeable future,” the analysts wrote.
Making it work would require that beyond the cost of launching and assembling large amounts of heavy equipment, technological solutions for managing radiation and cooling in space have not yet been developed.
political headwinds
Despite SpaceX’s current high valuation, only eight U.S. companies are worth more, the merger could create additional headaches for shareholders.
In addition to diverting SpaceX’s profits to xAI’s significant infrastructure costs, the new company also comes with a number of legal risks and regulatory concerns.
XAI is being investigated by market regulators in Europe, India, Malaysia and other countries, as well as California’s attorney general in the US, for using its Grok image generator to allow users to create and share explicit “deepfake” images of children and women.
On Tuesday, French investigators raided Mr.
At X, Musk called the attack a “political attack.”
Eric Talley, a law professor at Columbia University, said SpaceX investors may have to bear some of the regulatory risk xAI faces. While SpaceX’s defense contracting business is concentrated in the United States, much of its Starlink business is international.
“Various regulators may say that you need to be in overall good standing as an organization to continue operating within their jurisdiction,” Tully said. Even if SpaceX’s subsidiaries were not responsible for each other, they could affect each other’s “regulatory positions,” he said.
These complications may be manageable for Mr. Musk as long as SpaceX is privately held and he can maintain control without worrying about stock price volatility. But whether SpaceX can maintain a high public market valuation while absorbing the new risks associated with xAI is an entirely different story.
According to Reuters, SpaceX generated about $15 billion in revenue and $8 billion in profits last year. Meanwhile, Tesla reported sales of about $95 billion and adjusted profits of about $5 billion in 2025, which were down significantly from 2024.
For Mr. Musk to liquidate his SpaceX holdings, Wall Street needs to accept the company’s announced valuation.
Tesla shareholders have at least some vested interest in a positive outcome. The company announced last week that it had agreed to invest $2 billion in xAI as part of a funding round that closed earlier this month.
“Tesla’s recent investment in xAI is now an investment in SpaceX,” Anne Lipton, a University of Colorado law professor and former corporate and securities attorney, said in an email. The merger is “further evidence that Musk is willing to work on deals across his empire, but we already knew that.”
Tesla investors worried that Musk is too focused on outside the company may hope that the prospect of a $1 trillion long-term dividend will be enough to keep him from straying.
Mr. Musk’s compensation package, approved by shareholders in November, consists of 12 tranches of stock that will be awarded if Tesla reaches certain milestones over the next 10 years, such as market capitalization growth or business performance. The first tranche of shares will be paid if Tesla’s market capitalization reaches $2 trillion, about $400 billion more than its current valuation.
—CNBC’s Robert Frank, David Faber and Ari Levy contributed to this report.
WATCH: Why Elon Musk is changing direction
