Tesla has agreed to invest around $2 billion into xAI.

At the same time, xAI is in talks to merge with rocket and satellite Internet firm SpaceX, Reuters reports. The move would come ahead of a much-anticipated SpaceX IPO.

In November, Elon Musk-led carmaker Tesla held a shareholder vote on whether it would invest in Musk's private generative AI company. Shareholders did not approve of the move – but it was an advisory proposal, and non-binding.

Despite the vote, Tesla said that it agreed on January 16 to invest in xAI’s Series E funding round. Musk's SpaceX invested $2bn in xAI last year.

Tesla also revealed that it sold $430 million worth of Megapack batteries to xAI, which the company uses to help power its Colossus data center in and around Memphis, Tennessee.

This accounted for around 3.4 percent of Tesla’s energy business revenue.

The sales and investment come as Tesla sales continue to decline around the world, partially due to Musk's foray into partisan politics, and partially due to the rise of cheaper and newer Chinese cars.

Musk said that Tesla would end production of Model S and Model X higher-end vehicles, and use the factory space in Fremont, California, to manufacture Optimus robots. He said that he still expects to start production on the fully autonomous two-seater Cybercab in April.

Alongside operating as CEO of Tesla and xAI, Musk is CEO of SpaceX.

The company, which dramatically reduced the cost of rocket launches and runs space Internet business Starlink, is preparing for a much-anticipated IPO worth more than $1 trillion.

Reuters reports that Musk is now considering merging it with xAI (which itself was merged with X, previously Twitter). That business was valued at $230bn in November.

Musk has increasingly spoken about a desire to deploy data centers in space. "Starship could deliver 100GW/year to high Earth orbit within four to five years if we can solve the other parts of the equation," he said last year.

For now, however, xAI's ambitions remain terrestrial – earlier this month, the company confirmed it is set to build a third data center in Mississippi, with plans to invest more than $20 billion in the state.