'Muskonomy' shakeup: SpaceX valuation approaches Tesla's after merger with xAI

Elon Musk's recent decision to merge SpaceX with his artificial intelligence startup, xAI, marks a significant shift in his business strategy, potentially reshaping the landscape of his corporate empire. This merger indicates a notable change, as SpaceX's private market valuation of approximately $1.25 trillion is now nearing Tesla's market capitalization of about $1.58 trillion. Musk's ownership stakes further illustrate this transition; he holds an estimated 43% in SpaceX compared to just 13% in Tesla. This shift means that SpaceX now constitutes over half of Musk's substantial wealth, which has soared past $852 billion, as reported by the Forbes Real-Time Billionaires Index. However, Tesla's stock has dipped 6% at the start of 2026, with a 16% year-over-year decline in vehicle deliveries noted in early January and a 3% drop in total revenue for 2025—the first annual decline in its history. The challenges facing Tesla stem from intense competition in the electric vehicle sector, particularly from rivals in China and Europe, combined with the ending of a federal tax incentive for EV purchases in the U.S. Additionally, Musk's political engagements have drawn criticism, impacting the brand's image. As Tesla's sales wane, Musk has been pivoting the company’s focus towards Robotaxi services and the Optimus humanoid robot initiative, both of which face significant challenges and competition. In a recent analyst call, Musk announced the cessation of production for the Model S and X vehicles, repurposing the manufacturing lines for Optimus production instead. In contrast to Tesla's struggles, SpaceX is firmly established as a leader in orbital launch services, securing billions in contracts with NASA and the Department of Defense. The company also operates the Starlink satellite internet service, boasting over 9,000 satellites and approximately 9 million customers. With plans for an initial public offering (IPO) on the horizon, SpaceX is in a unique position, especially with Jared Isaacman, a former investor, now in a prominent role at NASA. The merger values SpaceX at $1 trillion and xAI at $250 billion, as indicated by documents reviewed by CNBC. This follows a prior transaction where xAI acquired the social media platform X, formerly known as Twitter. Musk envisions using SpaceX's resources to establish data centers in space, which he believes would alleviate energy constraints faced on Earth. However, analysts from Moffett Nathanson have pointed out the significant capital required for this ambitious project, highlighting the enormous operational and financial challenges ahead. The technical complexities of managing radiation and cooling in space remain unresolved, suggesting that achieving this goal is far from imminent. Despite SpaceX's impressive valuation, the merger introduces potential complications for shareholders. The financial resources of SpaceX may also be diverted to cover xAI's extensive infrastructure expenses, compounded by various legal and regulatory hurdles facing xAI in multiple jurisdictions due to recent investigations. As Musk navigates these complexities, experts suggest that the intertwined nature of his ventures could impact regulatory standing across the board. While SpaceX's defense contracts are primarily U.S.-focused, much of its Starlink operations are international, raising questions about compliance with various regulatory bodies. Musk's strategy appears to be a calculated risk, especially as SpaceX remains privately held, affording him greater control without the pressures of stock market fluctuations. However, the future value of SpaceX in the public market, particularly with the additional risks associated with xAI, remains uncertain. Last year, SpaceX reported revenues nearing $15 billion and profits of $8 billion, while Tesla's sales for 2025 were nearly $95 billion, albeit with a notable decline in earnings. For Tesla investors who are wary of Musk's focus shifting away from the company, the long-term prospects of a $1 trillion valuation could incentivize him to maintain his commitment. Shareholders recently approved a pay package for Musk that includes stock grants contingent upon Tesla achieving specific market capitalization milestones over the next decade, with the first tranche activated at a market cap of $2 trillion, a target that exceeds the current valuation by about $400 billion.