Elon Musk’s decision for SpaceX to acquire the artificial intelligence startup xAI sent shockwaves through global financial markets. It rekindled long-standing speculation that his corporate empire would eventually consolidate into a technology conglomerate.
This acquisition was announced this past week amid reports that SpaceX may be pursuing a $1 trillion initial public offering as soon as this summer.
But attention quickly shifted from the IPO towards a much more ambitious option: a possible merger between SpaceX and Tesla.
Polymarket has placed the odds that a Tesla and SpaceX merger will be announced before June 30th at 17%. This shows that, while it remains low, the possibility is not dismissed as impossible.
Dan Ives of Wedbush’s global head for technology research suggested that Musk may be moving towards a strategy of deeper integration between his companies.
“SpaceX and xAI merge…Tesla Next? Our view is that there’s a greater chance of Tesla being merged into SpaceX/xAI in the future. This growing AI ecosystem is expected to focus on Space and Earth …..and Musk may look to combine his forces”, Dan Ives posted earlier in the week on X.
SpaceX and xAI merge…Tesla is next? Our view is that there’s a greater chance of Tesla being merged into SpaceX/xAI in the future. This growing AI ecosystem is expected to focus on Space and Earth together …..and Musk may look to combine his forces.
Ives, in a separate statement, said “Tesla is now laser-focused on autonomous and robots during this crucial era for Musk & Co.” He also predicted that there would be “more interpolation between Tesla and SpaceX within the next year.”
Musk may have a consolidation goal in the long term, said He.
He wrote that Musk wants to control and own more of the AI eco-system. The holy grail, he said, could come in the form of a combination between SpaceX and Tesla within the next 12-18 months.
AI is the common factor between Tesla, SpaceX, and xAI
Analysts claim that Tesla is increasingly positioning itself as “physical AI”, rather than an automaker.
The company plans to start producing large quantities of its humanoid robotic robot, Optimus later this year.
Barclays analysts wrote in a Thursday report that, while the auto industry may be still the core of Tesla’s business, “the end” of Model S and X marks the “symbolic baton transfer” to “physical AI.”
The analysts stated that “in case it was not clear, now it is more than clear that Tesla does not operate as an automobile company.”
SpaceX’s ambitions go beyond satellites and rockets.
Capital from a possible IPO will be used to develop a business for space-based AI Data Centres, allowing the company to position itself as a major infrastructure provider within the AI Economy.
xAI is developing large-scale AI system, such as the Grok Chatbot. It competes against OpenAI’s ChatGPT, and Alphabet’s Gemini.
History of Corporate Convergence
Musk may have publicly denied merger speculations in the past but his track record as a corporate leader suggests that he has consolidated.
Musk’s response to a Tesla investor who asked X if the company would merge with xAI last year was “No” when Musk received his poll results.
Musk, over the years, has shown an increasing tendency to combine his companies.
SpaceX merged with xAI in March last year, before the merger. Don’t forget Tesla acquired SolarCity back in 2016.
Musk has publicly acknowledged the fact that his businesses are becoming more integrated.
He wrote in November last year that “my companies, surprising as it may seem, are trending towards convergence.”
Analysts say that this convergence has become increasingly apparent.
Chris Beauchamp said that Elon Musk’s ambition is to merge all of his businesses under a single umbrella. This merger represents a major step forward.
Musk added, “it is highly likely that Tesla will merge with the SpaceX Group in the future once SpaceX has been listed.” This could consolidate Musk’s status as a financial and technological powerhouse.
Dan Coatsworth – head of markets for AJ Bell – portrayed the concept in a more colorful way.
Musk Metropolis is a future vision with a man and white cat who want to dominate the world, he explained. He also noted that Musk could manage his vast portfolio better by having everything under one corporate roof.
Financial ties deepen across Musk’s companies
The financial links between Musk’s businesses have increased in the last few years, and this is not just a strategic statement.
Tesla has announced a stake of $2 billion in xAI and established a framework for future collaborations.
SpaceX has paid Tesla $2.5 million in commercial agreements between 2024-2025, and $800,000. Tesla also paid SpaceX $800,000.00 for the use of an aircraft that SpaceX owns.
xAI is also a big customer of Tesla’s energy division, having purchased more than 620 million dollars worth of Megapack Tesla batteries in the last two years for its data centers.
Tesla’s electric cars and robots are now equipped with xAI Grok, a chatbot developed by xAI. This integration blurs the lines between companies.
Adam Jonas, Morgan Stanley’s analyst, argues that the strategic importance of these links.
He said that Tesla’s financial and strategic relationship with xAI is deterministic for the success of Tesla in the future due to the synergies between data, software and hardware in recursive cycles.
SpaceX IPO: Implications
SpaceX’s public listing is questioned by the prospect of a Tesla and SpaceX merger.
Russ Mould suggested, as the investment director of AJ Bell’s, that a merger could change the IPO equation.
He said that rumors about a possible further merger with Tesla, to create an effective MuskCorp which would eliminate the need for a SpaceX IPO have been circulating.
Most analysts still believe that an IPO is the most likely result in the short term. SpaceX’s capital needs are clear, and the preparations to list appear advanced.
Ben Kallo, of Baird, argued that the purchase of xAI might actually slow down merger discussions.
Musk said that his immediate priority is to execute a SpaceX public offering, which Musk hopes will take place in mid-year. He did not mention a complicated corporate restructuring.
Investors’ concerns and structural obstacles
A merger between SpaceX and Tesla would be fraught with financial challenges, as well as governance issues.
MarketWatch quoted Brian Mulberry, of Zacks Investment Research as saying that Tesla’s energy division could be a cash flow buffer in the combined entity and that Tesla’s production lines could support robotics manufacturing and aerospace manufacturing.
He said, “It makes financial sense but I would need to see how the shares that are currently held privately in SpaceX work.”
Others are more skeptical.
Gary Black, The Future Fund’s managing partner, posted on X the warning that a possible merger could require Tesla to sell additional shares and dilute existing investors.
Retweeting @Teslarati
TSLA owns 0.16% ($2B / 1.25T) of SpaceX / xAI after its investment in xAI. A shareholder vote to merge $TSLA and SpaceX / xAI will fail, we still think.
We still think that a vote by shareholders to merge $TSLA and SpaceX / xAI will fail due to the huge dilution to TSLA investors (45%). TSLA could get many benefits from SpaceX / xAI, without merging companies. “Math matters,” said he.
Black said all Tesla investors may not wish to bet money on the exploration of space and sell their stock.
The SpaceX-xAI merger sparks speculation: Could a Tesla and SpaceX merger follow? This post may change as new information becomes available
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