Elon Musk is combining rocket maker SpaceX with his artificial intelligence startup, xAI, as the merged entity gears up for a massive IPO.

Elon Musk is joining his space exploration and artificial intelligence ventures into a single company before a massive planned initial public offering for the business later this year.

The merger will “form the most ambitious, vertically-integrated innovation engine on (and off) Earth, with AI, rockets, space-based internet, direct-to-mobile device communications and the world’s for...