U.S. Senators Elizabeth Warren and Andy Kim have sent a letter to Defense Secretary Pete Hegseth, raising alarms that undisclosed Chinese investments in Elon Musk's SpaceX could constitute a national security threat. The senators urged the Pentagon to conduct an immediate review of the company.
The concerns stem from media reports and court testimony suggesting that investors linked to China routed funds through entities in the Cayman Islands and British Virgin Islands to mask purchases of SpaceX shares. The senators argue that any Chinese ownership could trigger U.S. rules governing foreign ownership, control, or influence (FOCI), given the potential exposure of sensitive information or technologies.
In their letter, the senators demanded the Department of Defense disclose the extent of any Chinese ownership, assess whether SpaceX is subject to FOCI mitigation requirements, and determine if the investments should be reviewed by the Committee on Foreign Investment in the United States (CFIUS). They have requested a response by February 20.
The senators highlighted that the urgency of these questions is amplified by SpaceX's recent merger with Musk's artificial intelligence company, xAI. The $1.25 trillion all-stock merger, which became official on Monday, was structured as a triangular merger, making xAI a wholly-owned subsidiary of SpaceX. This structure allows SpaceX to own xAI while insulating itself from xAI's past contracts, lawsuits, and an estimated $17 billion in debt.
The merger, now the biggest corporate merger ever recorded by LSEG data, sets a path for a SpaceX IPO later this year, potentially raising over $50 billion. However, the addition of AI and social media (xAI owns the X platform) to SpaceX's core aerospace and military work has made some investors uneasy about valuing the new conglomerate.
