SpaceX and Tesla Have Officially Begun Merger Discussions

Elon Musk loves a merger. Especially if it involves his own companies. First, he had his AI lab xAI join his space giant SpaceX to form one giant space exploration and AI development company. Now he wants to add autos and robots into the mix by merging SpaceX with Tesla. Both Tesla and SpaceX have formed special committees to discuss a potential merger, Musk said at SpaceX’s third quarter earnings call on Tuesday. “I’m a conflicted party; I can’t actually be in the discussions of the special committees,” Musk said, adding that he personally thinks it would be a good idea. But the merger is not yet a certainty, the former trillionaire told investors, as the committees have yet to reach an agreement on the terms, and even if they do, the deal would have to be approved by shareholders of both companies. Especially on the Tesla side, Musk said that a merger decision would require half of all shareholders’ approval, not just those who vote. Musk has been teasing the possibility of a merger for months, but this is the first actual confirmation that the companies are taking action towards one. Yorkville Ives partner and senior managing director Dan Ives told Gizmodo that the merger is a matter of when, not if, and that his firm sees a more than 80% chance of it happening next year. Deepwater Asset Management managing partner Gene Munster shared a similar conviction via a post on X, claiming that there is a 95% chance that a merger takes place in the next two years. The merger could really benefit Musk personally. According to a Wall Street Journal report from August, it may boost Tesla’s valuation high enough to satisfy the requirements for Musk to receive a $1 trillion pay package. Shortly after the earnings call where Musk confirmed the mere distant possibility of the merger, Tesla’s stock went up a little less than 2%. But the merger wouldn’t be totally out of left field either. Both companies have AI at the heart of their business narratives; SpaceX through xAI and Tesla through its physical AI business that spans autonomous driving and the Optimus robots, which Musk wants to integrate SpaceX’s Grok into. The merger would bring all of those AI initiatives under one particularly giant roof. The two companies are also partnering for Terafab, Musk’s ambitious chip factory project in Texas that’s meant to produce AI chips for both terrestrial and space-based use. On the call, Musk claimed that SpaceX had notched “some significant potential breakthroughs in chip fabrication,” but didn’t want to discuss the specifics. “Let’s not give away the shop here, but I am optimistic that we will dramatically accelerate chip production, and that Terafab will ultimately do what the name suggests, which is to make a terawatt of superintelligence chips per year,” Musk said. The earnings report also showed that SpaceX’s AI business is proving more lucrative than previously thought. Revenue came in almost $2 billion above market expectations, per LSEG consensus estimates reported by CNBC. That was largely thanks to a roughly ninefold revenue jump in its AI business, bringing it up to $7.56 billion this quarter from the $813 million figure reported in the same quarter last year. “SI or superintelligence was again the standout growth driver for the quarter,” SpaceX chief financial officer Bret Johnsen said on the call, referring to the quarter as a “clear inflection point” in the AI, or rather SI, business. SpaceX recently renamed the AI division to SI to follow along with Trump’s odd new naming convention. Driving a sizable portion of that growth was SpaceX’s business renting out AI computing capacity to other companies. “We are also, frankly, hounded relentlessly by every hyperscaler and by dozens of smaller companies to rent more of our compute,” Musk boasted on the call. “So we could rent out our compute several times over if we said yes to everyone.”