Al Root

The biggest winners in the SpaceX-xAI merger might be the original Twitter shareholders, while SpaceX shareholders might be the losers.

The head of both xAI and SpaceX, as well as Tesla, Elon Musk, shocked the investment world Monday when he announced that SpaceX had acquired xAI, creating what he called "the most ambitious, vertically-integrated innovation engine on (and off) Earth."

One of the goals is to put AI data centers in space, where they won't face real estate, power, or cooling constraints. SpaceX can put things in space at a rate unmatched in human history, so essentially it became an AI juggernaut overnight.

Before the deal, SpaceX was "a cash machine," said Greg Martin, managing director at the private market exchange Rainmaker Securities. He estimates SpaceX's Ebitda profit margins could be as high as 50%. SpaceX didn't respond to a request for comment about its profitability.

Ebitda is short for earnings before interest, taxes, depreciation, and amortization. Aerospace companies in the S&P 500 generate Ebitda profit margins of roughly 20% on average. Higher margins aren't unprecedented. TransDigm Group's margins are north of 50%.

Triangulating SpaceX's profits isn't easy. SpaceX doesn't produce financial statements. Management, however, said its Starlink business was profitable in 2024, with about half the users it has today. And it's easy to imagine SpaceX's launch business is profitable, given its cost advantage from reusable rockets, which has given it a near-monopoly in the Western world.

Martin's margin projection means SpaceX might be on track to generate as much as $10 billion in Ebitda in 2026. xAI is a different story. Musk's AI company, like OpenAI, doesn't appear to be profitable and is operating in a capital-intensive, brutally competitive market.

In other words, xAI needed SpaceX more than SpaceX needed xAI. "SpaceX was a great business on its own," said Martin. xAI is "light on revenues...nowhere near OpenAI or Anthropic or Google Gemini...consuming a ton of cash."

OpenAI is estimated to have generated about $13 billion in 2025 revenue. Losses might have approached $10 billion due to spending on AI computing technology.

That's the kind of business xAI is in. SpaceX shareholders have to accept that their rocket company is a riskier bet than it was before the deal. The largest shareholder of both companies, Musk, doesn't seem to mind.

X, formerly Twitter, shareholders are the ones who should be positively euphoric about recent developments. Musk bought Twitter for $44 billion in 2022. Investors that stuck around, such as Fidelity, wrote down the value of Twitter by roughly 80% by 2024.

Then Musk had xAI buy Twitter, now X, for $44 billion in March 2025. The combined company was worth about $113 billion at the time. SpaceX paid an estimated $250 billion for xAI. So, a Twitter investor more than doubled their money in a little more than four years.

And now they hold SpaceX stock, which is looking for another valuation bump in a 2026 IPO.

Twitter investors probably didn't see that outcome while they were writing down their stakes in 2023 and 2024. Then again, Musk is unpredictable, has a history of value creation, and the AI market has developed faster than many expected.

Write to Al Root at allen.root@dowjones.com

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February 05, 2026 03:25 ET (08:25 GMT)

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