SpaceX Absorbed xAI at a Combined $1.25 Trillion Valuation. Here Is What That Means for the Coming IPO.

2026 is proving to be a big year across the Elon Musk empire. Just a month ago, he merged xAI -- which also owns X (formerly Twitter) -- into SpaceX. Yes, the man likes the letter X. Now, Musk and the SpaceX team are planning the largest initial public offering (IPO) in history.

SpaceX merged with xAI at a valuation of $1.25 trillion. Here's what that means for the upcoming IPO, and whether investors should get in on the hype and buy some shares of this spaceflight company.

Setting the valuation stage

Back in February, SpaceX and xAI surprised the financial world by completing a rapid merger, likely done quickly because both companies are controlled by Elon Musk and others close to him. The merger valued SpaceX at around $1 trillion and xAI at $250 billion, giving them a combined value of $1.25 trillion.

While investors can debate how valuable these companies actually are, one purpose of the merger was to set the stage for SpaceX's upcoming IPO. It aims to go public with a market cap of $1.75 trillion or more. This valuation will be analyzed more closely once its financials are included in an S-1 filing, but today these are the latest numbers journalists are reporting.

Investors will likely view this upgraded $1.75 trillion valuation much more favorably than the previous $1.25 trillion valuation and SpaceX's individual valuation in July 2025 of $400 billion. It is still to be determined whether SpaceX will be able to raise money at $1.75 trillion, but that is what it is aiming for. It also wants to raise the largest amount of capital in history for an IPO, ranging from $40 billion to $80 billion, according to the latest reporting.

Image source: Getty Images.

Should investors get in at the IPO?

It is going to be a big year for SpaceX, and investors will likely be excited to buy the stock. Musk wants to allocate a large portion of the IPO proceeds to retail investors as well, which should further drive the frenzy in capital markets.

However, even if you think SpaceX is a promising business, the stock is likely to trade at a very steep valuation if its market cap reaches $1.75 trillion. SpaceX reported revenue of $16 billion in 2025. Even tossing in some revenue from xAI, the business likely did not do much more than $20 billion in revenue last year. That would give the stock an extreme valuation and likely mean poor forward returns over the next decade, even if the business experiences rapid growth.

As with most IPOs, it's smart to avoid buying SpaceX on its market debut. Stay patient and keep it on the watch list.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.