Tesla and SpaceX Explore $3.5 Trillion Merger

Elon Musk said on Wednesday that Tesla and SpaceX had formed committees of independent directors to explore a merger valued at $3.5 trillion (£2.6 trillion), which analysts say could give him more cash and borrowing power for AI investment. Musk said he sees merit in combining the companies, but no terms have been agreed and there is no guarantee a deal will proceed. He said he was excluded from the discussions because of his conflicting interests. Tesla shareholders representing at least half of its outstanding shares would need to approve a deal, a threshold Musk acknowledged would be difficult to meet.

Steven Wahrhaftig, vice president of equity research at Wedbush, said the combined company would likely increase AI spending and tap debt markets. He said both companies have investment-grade debt ratings and Tesla holds around $45bn in cash, which could strengthen the group’s finances and fund AI infrastructure. Jonathan Pitkanen, senior credit analyst at Bloomberg Intelligence, said a merger could add cash-flow diversity, scale and broader access to debt and equity capital. A combined valuation of around $3.5 trillion could support projects requiring tens or hundreds of billions of dollars in additional funding, though Musk would need to balance investment against the risk of burning through cash, Wahrhaftig cautioned.

Tesla’s automotive business is struggling to regain momentum: quarterly net profit fell 43 per cent to $787m, revenue was broadly flat at $28bn, and automotive revenue declined three per cent to $20.6bn amid rising costs and weaker margins. SpaceX reported quarterly profit of $4.4bn as revenue rose 161 per cent to $14.6bn. Its AI computing division became its largest revenue source, surpassing Starlink, with $7.6bn for the quarter. The merger would combine Tesla’s electric vehicles, robotics and battery technology with SpaceX’s rockets and AI infrastructure. The companies already work together on Terafab, Musk’s chip manufacturing project.

Forrester analyst Octavio Garcia said the companies increasingly overlap in AI, robotics, manufacturing and energy, but said a merger would not automatically increase their value. He said it could consolidate more of Musk’s industrial and technology vision under one corporate structure, given his greater voting control at SpaceX than at Tesla. Analysts also cited added complexity, regulatory scrutiny and risks for Tesla shareholders; Wahrhaftig said a deal was more likely than not, though regulatory hurdles could delay it. SpaceX shares rose after Musk’s merger comments and stronger-than-expected earnings, while Tesla shares also gained. Earlier this year, SpaceX acquired Musk’s AI startup xAI and social media platform X before its stock market debut.

Elon Musk said on Wednesday that Tesla and SpaceX had formed committees of independent directors to explore a merger valued at $3.5 trillion (£2.6 trillion), which analysts say could give him more cash and borrowing power for AI investment. Musk said he sees merit in combining the companies, but no terms have been agreed and there is no guarantee a deal will proceed. He said he was excluded from the discussions because of his conflicting interests. Tesla shareholders representing at least half of its outstanding shares would need to approve a deal, a threshold Musk acknowledged would be difficult to meet.

Steven Wahrhaftig, vice president of equity research at Wedbush, said the combined company would likely increase AI spending and tap debt markets. He said both companies have investment-grade debt ratings and Tesla holds around $45bn in cash, which could strengthen the group’s finances and fund AI infrastructure. Jonathan Pitkanen, senior credit analyst at Bloomberg Intelligence, said a merger could add cash-flow diversity, scale and broader access to debt and equity capital. A combined valuation of around $3.5 trillion could support projects requiring tens or hundreds of billions of dollars in additional funding, though Musk would need to balance investment against the risk of burning through cash, Wahrhaftig cautioned.

Tesla’s automotive business is struggling to regain momentum: quarterly net profit fell 43 per cent to $787m, revenue was broadly flat at $28bn, and automotive revenue declined three per cent to $20.6bn amid rising costs and weaker margins. SpaceX reported quarterly profit of $4.4bn as revenue rose 161 per cent to $14.6bn. Its AI computing division became its largest revenue source, surpassing Starlink, with $7.6bn for the quarter. The merger would combine Tesla’s electric vehicles, robotics and battery technology with SpaceX’s rockets and AI infrastructure. The companies already work together on Terafab, Musk’s chip manufacturing project.

Forrester analyst Octavio Garcia said the companies increasingly overlap in AI, robotics, manufacturing and energy, but said a merger would not automatically increase their value. He said it could consolidate more of Musk’s industrial and technology vision under one corporate structure, given his greater voting control at SpaceX than at Tesla. Analysts also cited added complexity, regulatory scrutiny and risks for Tesla shareholders; Wahrhaftig said a deal was more likely than not, though regulatory hurdles could delay it. SpaceX shares rose after Musk’s merger comments and stronger-than-expected earnings, while Tesla shares also gained. Earlier this year, SpaceX acquired Musk’s AI startup xAI and social media platform X before its stock market debut.