SpaceX’s acquisition of xAI, structured as an all-equity share exchange valuing the combined entity at $1.25 trillion, is one of the largest transactions ever executed in private markets.

Though headlines have labelled the deal “unprecedented” and “momentous,” its real significance lies elsewhere. It crystallises structural forces that have been building beneath the surface: sustained valuation expansion in private AI, a widening divergence from public market multiples, and the consolidation of strategic infrastructure at scale.

To understand what this transaction represents, it is necessary to look beyond the headline valuation.

SpaceX operates the world’s largest satellite constellation and commands more than 90% of the reusable launch market. It has also built substantial GPU infrastructure to power xAI’s chatbot Grok and its training and inference models. Few organisations combine physical launch capability and advanced computational capacity at this scale.

Its history of executing complex, capital-intensive projects lends credibility to ambitions that might otherwise be dismissed as science fiction. When Musk recently referenced “orbital data centers [sic] and lunar-based ‘mass drivers," the remarks reflected an organisation with a track record of compressing timelines and redefining industry constraints.

The strategic logic is increasingly clear. AI computing on Earth faces rising energy demands, regulatory friction and physical limitations. Space-based infrastructure is being positioned as a structural response. In theory, orbital data centres could reduce licensing bottlenecks, mitigate geopolitical exposure, remove land constraints and draw on abundant solar energy.

The projected expansion of the global space economy through 2035 reinforces the direction of travel. The merger formalises what had already been underway: the consolidation of intelligence, launch capability and computational infrastructure within a single capital structure.

Grok can now be embedded directly in SpaceX's operations, accelerating autonomous mission control, satellite swarm management, and engineering optimisation. Elements of this integration were likely already underway internally, generating efficiencies not fully visible to the market.

As ambition scales, so too does valuation. Orbital compute. Vertically integrated AI infrastructure. Planetary expansion. The narrative is expansive. The valuation that supports it is equally strong.

It is at this intersection, between technological ambition and pricing discipline, that the transaction moves from engineering narrative to private market inflection.

Chris Darbyshire, Arbra’s Group Chief Investment Officer, views the merger as emblematic of a broader structural shift within private markets:

"This merger between SpaceX and xAI is absolutely massive, not just because of the headline combined valuation number, but because of how many different threads feed into it at once. It captures something very important about where private markets are today. In the past 12 to 18 months, private market valuations, particularly in AI, have completely decoupled from public markets. Multiples in private transactions have risen far faster than anything seen in listed equities, without any meaningful correlation to them. That’s how we have arrived at a trillion-dollar space company merging with a quarter-trillion-dollar AI start-up, which are both still private."

He also highlights the contrast in execution speed:

"In public markets, something like this would take a year. Disclosure, shareholder votes and regulatory processes take time. But in this case, it’s just done. From a public market perspective, this probably doesn’t move markets very much, but what it does is highlight that private markets almost exist in a world of their own."

Chris points to the pace of valuation expansion:

“If you look at the numbers, the momentum is extraordinary. xAI was valued at around $50 billion at the end of 2024, $80 billion in March last year, and roughly $230 billion a week before this deal. SpaceX moved from roughly $350 billion in December 2024 to $400 billion in July 2025, $800 billion in December 2025, and more than $1 trillion, according to some sources. These private transactions are treated as reference points, each pushing the next valuation higher."

The relative pricing of the two entities is striking:

"Based on the best available information, SpaceX is valued at roughly 43 times annualised revenues. That’s punchy, but it’s an exceptional company with a dominant position. xAI, even on generous assumptions, is valued at more than 200 times its revenues. From a shareholder perspective, xAI holders gain exposure to hard assets, infrastructure, and a proven operator at a significantly high multiple. SpaceX is asking its shareholders to invest in a much earlier-stage, far more uncertain business at a significantly higher price per unit of revenue."

The implication is not merely exuberance, but a pricing regime shaped by strategic optionality and long-duration conviction.

Akul Khullar, Arbra’s Investment Principal, considers what this means for capital allocation:

“So, where does that leave investors? A deal of this size has never been done before. It ultimately comes down to how much of the valuation rests not on cash flows or assets, but on whether belief itself can continue to sustain both companies at these levels.”

For Akul, the merger represents the convergence of two expansive markets:

“This transaction combines space and AI into one entity. These concepts may once have been science fiction, but SpaceX has been turning science fiction into operational reality for two decades. If xAI sought to raise $20 million or $20 billion tomorrow, almost every venture fund in the world would be willing to invest. You cannot ignore a $1.25 trillion market capitalisation. The first time Arbra invested in SpaceX, it was valued at $45 billion. Today, it is a completely different ballgame."

An IPO now becomes central to the capital markets narrative. Akhul Khullar says:

“There’s no doubt that the SpaceX IPO is poised to, potentially, be one of the biggest in history. There's never been a company like this raising that much money or going public at this valuation. It is the most valuable private market or venture-backed company in the world, plus it will be the second company from Musk that's going to be public. [The other, Tesla, went public in 2010]. There's also a lot of demand from institutional and retail investors. If I were a hedge fund manager thinking about book building or an ETF mutual fund manager thinking about tracking a particular area, SpaceX would definitely be in one of those ETFs. That's why it’s also preempting being in the NASDAQ and the SNP, because of how large it is, and there's so much demand to do it."

The transition from private to public ownership would introduce disclosure discipline and broaden the shareholder base, altering the company’s risk-reward dynamics.

The merger reflects how SpaceX has operated for more than two decades: expanding capability across political cycles, redefining industrial boundaries and turning once-speculative concepts into operational reality.

For investors, the opportunity lies at the intersection of structural growth and valuation discipline.

For Arbra, the role remains consistent: to temper enthusiasm with analysis, to distinguish optionality from cash flow, and to allocate capital where long-duration value can be sustained across cycles.

In private markets increasingly defined by velocity and conviction, clarity remains the scarce differentiator.