Elon Musk’s SpaceX is now valued at $1.25 trillion (€1.06tn) following its merger with artificial intelligence venture xAI, narrowing the gap with Tesla and reshaping the balance of power inside within his business empire.Tesla’s market capitalisation stands at about $1.58 trillion (€1.34tn), only 26% higher than SpaceX’s latest private valuation.On paper, Musk now derives more of his wealth from the rocket company than from the electric carmaker.Tesla’s value slipped at the start of 2026. The stock is down around 6% this year, after the company reported a 16% fall in vehicle deliveries in early January and a 3% drop in total revenue for 2025 — its first annual decline on record.The core car business has come under pressure from rising competition in China and Europe, as well as the end of a federal tax credit for electric vehicles in the US.Musk’s political activity, including ties to the Trump administration and support for far-right figures in Europe, has also weighed on the brand.Electric vehicle sales drop, forcing shift to robotsAs EV sales soften, Musk has shifted Tesla’s focus towards robotaxi services and its Optimus humanoid robots — areas where the company has yet to build a meaningful business.Last week, he told analysts Tesla would end production of its Model S and X vehicles, which accounted for less than 3% of deliveries in 2025, and repurpose those production lines for Optimus.By contrast, SpaceX occupies a dominant position in its core markets. The company is the leading provider of orbital launch services, with multi-billion-dollar contracts from NASA and the US Department of Defense.It also operates the Starlink satellite internet network, which has more than 9,000 satellites in orbit and about nine million customers.The merger announced this week values SpaceX at $1 trillion (€847bn) and xAI at $250 billion (€212bn).It follows a previous deal last year in which xAI acquired the social media platform X, formerly Twitter, in a stock transaction.Musk said the SpaceX-xAI tie-up is intended to support the development of data centres in space, which he believes could avoid energy constraints on Earth.They said a full-scale rollout was unlikely in the near term, given the technical, supply-chain and financial challenges.The project would require new solutions for radiation protection and cooling in space, as well as the cost of launching and assembling large amounts of heavy equipment.Political and regulatory risks for XDespite the lofty valuation, the merger could create new risks for investors. SpaceX profits may be diverted to fund xAI’s infrastructure, while the AI company faces regulatory scrutiny in several markets.Authorities in Europe, India, Malaysia and the US have launched investigations into xAI’s Grok image generator after it was used to produce explicit deepfake images of women and children.French investigators also raided X’s offices this week as part of a probe into alleged algorithmic abuse.Legal experts say some of those risks could spill over to SpaceX, particularly as much of its Starlink business operates internationally.For now, those complications may be easier to manage while SpaceX remains privately held and under Musk’s control.A future public listing would raise tougher questions about whether investors would support such a high valuation alongside new regulatory and political risks.