One of the biggest financial storylines so far in 2026 revolves around whether or not SpaceX will go public. While some headlines suggest Elon Musk's space exploration company has been meeting with investment banks to talk about an initial public offering (IPO), a new chapter is swiftly being written as that narrative unfolds.
On Feb. 2, Musk announced a merger of SpaceX and his artificial intelligence (AI) start-up, xAI, and valued the company at $1.25 trillion. The combination of these two assets makes a potential SpaceX IPO all the more interesting.
Nevertheless, I find these talking points to be totally distracting. Below, I'll explain why merging xAI and SpaceX makes strategic sense. But more importantly, I'll reveal my top stock pick at the intersection of AI and space exploration. Spoiler alert: It has nothing to do with Musk.
Image source: Getty Images.
Does the SpaceX merger with xAI make sense?
On the surface, merging an AI start-up with a rocket ship company looks silly. When it comes to Musk, however, there are always several layers to the equation.
Throughout his tenure as CEO of Tesla, Musk has often hinted at a desire to merge SpaceX with the electric vehicle (EV) company. Notably, Tesla recently received shareholder approval to make a $2 billion investment in xAI.
Merging xAI with SpaceX, as well as Tesla's decision to make a strategic investment in xAI, comes down to one thing: Musk's obsession with control. From a governance perspective, combining xAI with SpaceX provides Musk with far more oversight of his two prized possessions.
From a technological standpoint, xAI and SpaceX can certainly complement one another. Space systems generate large volumes of critical information. Take Starlink as an example: Its network collects data across various geographies, weather patterns, and user habits, and creates satellite and orbital imagery.
Thanks to AI, space infrastructure can use this information to improve training and deployment data surrounding autonomous systems, detect network inconsistencies, and perform predictive modeling.
In essence, satellites and rockets are functioning as distributed processors -- bringing inference close to the original source of data. This helps unlock new use cases as space emerges as a core pillar supporting critical AI execution.
Why Alphabet is my top pick at the intersection of AI and space exploration
Alphabet's (GOOGL 1.35%) (GOOG 1.30%) AI ecosystem spans many pockets -- including advertising, search, cloud infrastructure, sustainable energy, and autonomous driving. What most investors probably do not realize is that Alphabet has a major presence in the space economy, too.
According to 13F filings, Alphabet's largest investment in another public company is AST SpaceMobile -- which accounted for 18% of the company's portfolio as of the end of the third quarter. In addition, Google owns an equity stake in SpaceX dating back to 2015.
NASDAQ: GOOGL
Key Data Points
Alphabet's investments in SpaceX and AST SpaceMobile allow investors to benefit from the upside of the space economy without being directly exposed to the industry's regulatory scrutiny and capital-intensive requirements.
Through Alphabet, investors are buying into one of the most profitable enterprises in the world, supported by robust, recurring cash flows. At the same time, Alphabet's broader portfolio of investments provides a rare form of optionality to investors seeking access to space infrastructure without paying a premium or dealing with the inevitable volatility of an IPO.
To me, Alphabet is a more compelling opportunity than SpaceX because the company is already monetizing AI across a host of products and services, and has the optionality to profit from the final frontier should space exploration become more commercialized.
