March 16, 2026 – SpaceX’s takeover of Elon Musk’s AI venture xAI has won a strong endorsement from a key investor. Baillie Gifford, the Edinburgh-based asset manager, views the pre-IPO merger as a strategic masterstroke. Peter Singlehurst leads Baillie Gifford’s private companies team. He told Bloomberg Television that SpaceX holds a privileged position with strong profitability. This support arrives as SpaceX prepares for what could become one of history’s largest public offerings.
The Merger: A $1.25 Trillion Bet
The SpaceX acquisition of xAI closed in early February 2026. Bloomberg reported the combined entity is valued at approximately $1.25 trillion. SpaceX had already been valued at $800 billion during a December secondary share sale. Meanwhile, xAI reached a $230 billion valuation in a $20 billion funding round. That round attracted heavyweight investors including Nvidia, Fidelity, and the Qatar Investment Authority.
The merger unites SpaceX’s orbital launch infrastructure with xAI’s AI capabilities. Musk described it as a “vertically-integrated innovation engine” in a blog post. The combined business also includes the X social media platform. According to Reuters, SpaceX generated roughly $8 billion in profit on $15–$16 billion of revenue in 2025.
Fig 1: SpaceX-xAI valuation trajectory from pre-merger to IPO target. Sources: Bloomberg, CNBC.
Why Baillie Gifford Backs This Deal
Baillie Gifford holds SpaceX shares through several investment trusts. These include Scottish Mortgage, Edinburgh Worldwide, and Baillie Gifford US Growth. Singlehurst highlighted SpaceX’s strong balance sheet as a decisive factor. He argued that xAI’s heavy capital needs make SpaceX an ideal partner. SpaceX’s cash flow can fund xAI’s expensive AI infrastructure buildout.
Singlehurst drew a comparison to Tesla’s 2016 acquisition of SolarCity. That deal initially sparked investor scepticism but eventually proved successful. Bloomberg reported that SpaceX may raise up to $50 billion through a summer IPO. That could value the company at more than $1.75 trillion.
Fig 2: SpaceX revenue and profit (2024–2026). Sources: Reuters, Payload Space.
Financial Pressures and Governance Risks
However, the merger is not without controversy. xAI reportedly generated just $250 million in revenue over six months. It lost $2.5 billion in the same period. That burn rate contrasts sharply with SpaceX’s proven profitability. Tesla also invested $2 billion in xAI’s Series E round in January 2026. Shareholders have filed lawsuits alleging Musk breached his fiduciary duty to Tesla.
Leadership stability is another concern for prospective IPO investors. Ten of xAI’s twelve original co-founders have departed. Only Manuel Kroiss and Ross Nordeen remain from the founding team. Musk admitted on March 13 that xAI was “not built right first time around.” These dynamics raise serious questions about readiness for public markets.
Fig 3: xAI co-founder departures since founding in July 2023. Source: Electrek, Fortune.
What Lies Ahead for Investors
Prediction markets suggest SpaceX could announce its IPO before August 2026. The offering could exceed $50 billion and rank among the largest ever. Payload Space estimates SpaceX’s standalone revenue will reach $23.8 billion in 2026. Consequently, the IPO valuation implies roughly 94 times trailing sales. At 500 times trailing earnings, the stock would need to grow enormously.
For Baillie Gifford, the bet reflects its long-standing commitment to high-growth companies. Yet the path forward hinges on xAI’s rebuild and SpaceX’s ability to absorb its losses. Regulatory scrutiny and governance concerns may also weigh on sentiment. As the IPO window approaches, the market will decide whether this merger creates or destroys value.
Sources
1. Bloomberg Television: Interview with Peter Singlehurst, Baillie Gifford (March 13, 2026)
2. CNBC – “Elon Musk’s SpaceX acquiring AI startup xAI ahead of potential IPO” (February 2, 2026)
3. Reuters – SpaceX 2025 financial estimates ($8B profit, $15–$16B revenue)
4. Electrek – “Musk admits xAI ‘not built right’” (March 13, 2026)
5. Payload Space – SpaceX 2026 revenue projection ($23.8B)
6. D&O Diary – “The SpaceX–xAI Merger” governance analysis (March 2026)
7. Fortune – xAI co-founder departures report (February 2026)
