Musk just created a $1.25 trillion company

The Big Story: What the SpaceX-xAI Merger Actually Means for Investors

Now that the dust has settled on yesterday's announcement, the question for prospective IPO investors is straightforward: what are you actually buying?

The headline: SpaceX acquired xAI in a deal valuing the combined entity at $1.25 trillion. But the financial profiles of these two businesses couldn't be more different.

SpaceX generated an estimated $8 billion in profit on $15-16 billion in revenue last year. Starlink—now serving 9+ million subscribers—accounts for roughly 70% of that revenue. It's a recurring, telecom-like business attached to a dominant launch provider.

xAI is burning approximately $1 billion per month as it races to compete with OpenAI and Anthropic. The company has faced regulatory probes over Grok's content moderation failures and community backlash over its Memphis data center operations.

Musk framed the deal around "space-based AI"—orbital data centers that bypass terrestrial power constraints. That vision is years away, if it's achievable at all. The more immediate reality, as Axios put it: "xAI shareholders effectively get a lifeline through the deal."

What IPO investors will actually own:

• A profitable space infrastructure and satellite internet business

• A money-losing AI venture competing against better-capitalized rivals

• X (formerly Twitter), which xAI absorbed last year

• Exposure to Musk's increasingly complex corporate structure

The Tesla complication: Tesla invested $2 billion in xAI just last month—capital that now flows indirectly to the combined SpaceX-xAI entity. A shareholder lawsuit alleging fiduciary breach over that investment remains ongoing. As one analyst noted, the merger "doesn't resolve those concerns—if anything, it makes the web of transactions more complex."

The IPO is planned for mid-2026, reportedly aiming to raise $30-50 billion. But investors will need to decide whether they're buying a space company, an AI company, or simply betting on Musk himself.

Waymo Closes $16B Round at $126B Valuation

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Alphabet's autonomous driving unit closed a $16 billion funding round yesterday—more than doubling its valuation from 14 months ago.

The post-money valuation: $126 billion, up from $45 billion in its October 2024 Series C.

The investor lineup: Sequoia Capital, DST Global, and Dragoneer Investment Group led the round. Alphabet maintained its position as majority investor, contributing approximately $13 billion. A16z, Mubadala, Bessemer, Silver Lake, Tiger Global, T. Rowe Price, Fidelity, GV, Kleiner Perkins, and Temasek also participated.

The expansion plan: Waymo said it will use the capital to fuel operations in more than 20 additional cities in 2026, including international expansion to Tokyo and London. The company currently operates in six U.S. metros and completed 15 million rides in 2025—triple the prior year's volume.

The scrutiny: NHTSA opened an investigation last week after a Waymo robotaxi struck a child near a Santa Monica elementary school, causing minor injuries. The agency and NTSB are also investigating incidents involving school buses.

The round represents one of the largest capital raises in autonomous vehicle history—and a significant signal that outside investors see commercialization approaching despite ongoing safety concerns.

Palantir Beats Estimates, Guides to 61% Revenue Growth

Palantir reported Q4 2025 earnings after the close yesterday that significantly exceeded expectations—sending shares up 6% so far today.

The numbers:

• Q4 EPS: $0.25 vs. $0.21 expected

• FY2026 revenue guidance: $7.19 billion (61% growth)

• Wall Street had expected: $6.27 billion (43% growth)

• Q1 2026 revenue guidance: revised to $1.53 billion (above consensus)

• U.S. commercial growth guidance for 2026: +115%

• Q4 net margin: 43%

The beat comes at a notable time. Palantir shares had fallen roughly 29% from their November peak and were down 15% year-to-date entering the report as software valuations faced broader scrutiny.

Why it matters for private markets: Palantir is one of the few pure-play "AI infrastructure" stocks in public markets. Its guidance provides a data point for valuing private AI companies—though at 142x forward earnings (third-highest in the S&P 500), the implied multiples remain elevated.

Quick Takes

Nvidia's $100B OpenAI commitment? "Never a commitment," says Huang — Jensen Huang clarified that September's $100 billion letter of intent was nonbinding. He confirmed Nvidia will "absolutely" participate in OpenAI's current round and called it potentially "the largest investment we've ever made"—but said the total won't approach $100 billion.

Global M&A neared $5 trillion in 2025 — Deal activity reached historic levels with more than 50,000 transactions, according to PitchBook. Megadeals worth at least $1 billion drove more than half the total value as investor confidence improved.

SEC and CFTC launch "Project Crypto" for regulatory clarity — The agencies announced a joint initiative to clarify digital asset rules, including questions around jurisdiction and market structure. The collaboration signals a potential shift toward clearer regulation.

Varo Bank raises $124M Series G — The all-digital nationally chartered bank raised fresh capital to expand operations. Varo focuses on providing comprehensive financial tools to consumers.

📊 Data Point of the Day

$1 billion per month

That's xAI's reported cash burn rate, according to Bloomberg. For comparison, SpaceX generated an estimated $8 billion in profit in 2025. The merger essentially pairs one of tech's most profitable private companies with one of its hungriest cash consumers.

📖 Manual

Continuation Vehicle (CV)

A GP-led secondary transaction where a private equity firm moves one or more portfolio companies from an older fund into a new vehicle, giving existing LPs the option to cash out or roll their investment forward. CVs have grown significantly as sponsors seek to hold winning assets longer while still returning capital to investors—though the market is increasingly focused on governance and transparency given potential conflicts of interest.

💰Funding Pulse

Notable raises from the past few days:

Day AI: $20M Series A — Sequoia backed startup led by Christopher O’Donnell, former CPO at HubSpot, who intends to build “The Cursor of CRM”

Linq: $20M Series A — The AI messaging assistant startup raised capital after pivoting from its origins as a digital business card company.

Fieldguide: $75M Series C — The AI audit platform raised a round led by Goldman Sachs Alternatives. The company is scaling its AI-powered audit and advisory tools.

What We're Watching

1. SpaceX IPO timeline — Does the xAI merger accelerate or delay the planned mid-2026 offering? And how will public markets price a company that's both a profitable space infrastructure business and a money-losing AI venture?

1. Nvidia's actual OpenAI commitment — Huang says the investment will be "huge" but won't be $100 billion. Watch for specifics when OpenAI's round closes—and how circular financing concerns affect the AI capital stack.

1. Waymo's international expansion — With $16 billion in fresh capital and plans for Tokyo and London, the company is betting that 2026 is the year autonomous mobility goes global. Execution and safety will determine whether investors' confidence is justified.