SpaceX SPCX has hit the market, but the buzz around it continues to remain with another question that is increasingly capturing Wall Street’s attention: could Elon Musk eventually merge his rocket company with Tesla
The idea, once considered far-fetched, has gained traction among analysts, investors and even employees close to Musk’s businesses.
In the run-up to the IPO, speculation had intensified that Musk may seek to bring two of his flagship companies under a single corporate structure.
According to a CNBC report, Musk has discussed the possibility of combining Tesla and SpaceX with colleagues, according to people familiar with the matter.
One current Tesla employee told CNBC that many workers have long expected such a transaction to occur eventually, while another person close to the company said shared challenges around computing power and energy infrastructure have increased collaboration between the businesses.
Shared resources, AI ambitions present case for merger
The rationale behind merger speculation stems largely from the growing overlap between Musk’s businesses.
The companies already maintain extensive commercial relationships.
SpaceX disclosed in its IPO filing that it purchased $697 million worth of Tesla Megapack battery storage systems during 2024 and 2025 to support xAI-operated data centres in Memphis.
The company also spent approximately $131 million on Tesla Cybertrucks in 2025.
Earlier collaborations included Tesla supplying solar equipment and automotive components to SpaceX, while SpaceX helped develop specialised materials used in Tesla’s Cybertruck.
AI could also become the strongest force pulling the companies together.
Tesla’s autonomous driving systems, robotaxi platform, and Optimus humanoid robot initiative are all heavily dependent on AI.
SpaceX, meanwhile, is pursuing AI-driven projects ranging from Starlink connectivity services to proposed orbital data centres.
Wedbush analyst Dan Ives believes these overlapping ambitions could eventually culminate in a merger.
“Step by step the holy grail could be combining SpaceX and Tesla in some way to give the connected tissue between both disruptive tech stalwarts looking to lead the AI Revolution,” Ives wrote.
Analysts point to multiple areas of potential integration.
Tesla’s robotaxis could eventually rely on Starlink connectivity, while AI systems developed through xAI could serve as conversational interfaces for Tesla’s vehicles and Optimus robots.
The two companies are also expected to collaborate on Terafab, a proposed semiconductor manufacturing facility in Texas involving Tesla, SpaceX, and Intel.
Both companies require vast amounts of computing power to support autonomous driving, robotics, and AI infrastructure projects.
Capital demands, ease of execution also create incentive
Beyond operational synergies, financing requirements could also encourage a combination.
SpaceX’s IPO filing revealed that the company spent more than $10 billion on capital expenditures during the first quarter of 2026 alone, resulting in approximately $9 billion of negative free cash flow.
The company is investing aggressively in Starship development, AI infrastructure, data centres, and other large-scale projects.
Tesla is facing its own spending surge.
The electric vehicle maker recently indicated that capital expenditures could exceed $25 billion this year as it ramps up investments in artificial intelligence, robotics, and autonomous transportation.
Some analysts believe combining balance sheets could help support those ambitions.
Tesla currently holds roughly $45 billion in cash, potentially providing additional financial flexibility for SpaceX’s long-term projects.
Reuters columnist Robert Cyran argued that a merger could also simplify questions about Musk’s allocation of time and resources.
“Pooling the companies would also superficially eliminate the awkward question of which corporate child Musk favors,” he wrote.
“Investors pay a huge premium for the billionaire’s science-fiction imagination. Tesla trades at 200 times estimated earnings, according to LSEG, while SpaceX’s proposed valuation is even more eye-popping. Yet Musk only has 24 hours in a day – or less, when accounting for his prolific tweeting – and questions over where he’s spending have raised investor hackles,” he said.
Morningstar analysts see similar strategic logic in a combination.
“The most important additional reason a merger makes sense is that Tesla and SpaceX CEO Elon Musk wants to consolidate his companies into one conglomerate,” they wrote.
“This would allow him to run all their operations under one roof without tripping on as many governance issues.”
Not everyone is convinced
Despite growing speculation, several analysts remain skeptical that a merger is imminent.
Oppenheimer, which recently initiated coverage of SpaceX with an Outperform rating and a $190 price target, acknowledged that a future merger is possible but stopped short of endorsing the idea.
An eventual merger with Tesla is “plausible”, analyst Timothy Horan wrote, but he believes both companies are likely to remain separate public entities.
Oppenheimer argued that maintaining two publicly traded companies provides Musk with greater access to capital markets.
The brokerage said Musk’s “longer-term vision of AI is best served by diversified, flexible access to capital” and that “having two public currencies supports that strategy most effectively.”
What could a likely merger entail?
A merger between SpaceX and Tesla would be unprecedented in scale, potentially becoming the largest corporate merger in history.
With SpaceX closing at $161 on its first session, putting it at a valuation of roughly $2.1 trillion and Tesla currently valued at around $1.65 trillion, the two companies are almost of similar size.
According to Fortune columnist Shawn Tully, the most likely structure would involve SpaceX acting as the acquirer.
To complete such a transaction, SpaceX would need to issue new shares equivalent to roughly 94% of its existing share count, reflecting the relative valuations of the two companies.
Based on SpaceX’s IPO filing, its share count could rise from about 4.1 billion shares to nearly 8 billion shares.
If the deal were completed near SpaceX’s anticipated IPO valuation, the combined company would command a market capitalization of approximately $3.7 trillion.
Likely challenges and hurdles
Despite its strategic appeal, a merger would face significant financial and governance hurdles.
While a combined valuation of $3.7 trillion would be extraordinary, the merged company would not necessarily be highly profitable.
Based on recent financial results, the combined profits generated by the two companies would remain negative.
Both Tesla and SpaceX are pursuing capital-intensive growth strategies that require enormous investments.
SpaceX’s IPO filing indicates it may need to raise additional capital through stock issuance and debt financing to fund projects such as Starship development, AI infrastructure, and orbital data centers.
Tesla is simultaneously ramping up spending on AI, robotics, and autonomous driving initiatives.
Critics argue that merging the two balance sheets would compound rather than solve these funding challenges.
According to David Trainer, CEO of research group New Constructs, SpaceX would need to achieve exceptionally ambitious financial targets to justify its current valuation, including approximately $248 billion in net income and $1.1 trillion in annual revenue by 2035.
A merger could also dilute existing SpaceX shareholders.
Under the scenario outlined by Tully, SpaceX investors would see their ownership stake fall from 100% to roughly 52%.
In exchange, they would acquire Tesla, which currently generates less than $4 billion in annual profit while requiring substantial capital expenditures of its own.
SpaceX shareholders would also inherit Tesla’s substantial capital spending commitments, adding to the already enormous investments required to build out SpaceX’s AI infrastructure.
Governance concerns could also emerge.
Legal experts say antitrust issues are unlikely because the companies operate in largely different industries.
However, questions around valuation, share-exchange ratios, parent-company structure, and shareholder approval could prove contentious.
Determining a fair price for both companies, deciding which entity would control the merged business, and addressing potential conflicts of interest involving Musk would likely become major points of debate among investors and regulators alike.
This post SpaceX IPO is done. Now comes the bigger question: A Tesla merger? appeared first on The ICD
Please note, this site provides content for entertainment purposes only and does not offer financial advice. Read more here
