SpaceX-xAI deal sparks talk: could a Tesla-SpaceX merger be next?

Elon Musk’s decision to have SpaceX acquire artificial intelligence startup xAI has sent ripples across global financial markets, reviving long-standing speculation about whether his sprawling corporate empire could eventually be consolidated into a single technology conglomerate.

The acquisition, announced earlier this week, already comes amid reports that SpaceX is pursuing an initial public offering valued at over $1 trillion as early as this summer.

But almost immediately, attention has shifted beyond the IPO to a more ambitious possibility: a merger between Tesla and SpaceX.

Polymarket currently places the odds of a Tesla–SpaceX merger being announced by June 30 at 17%, highlighting that while the probability remains low, it is no longer dismissed as implausible.

Dan Ives, global head of technology research at Wedbush, suggested that Musk’s strategy may be moving toward deeper integration across his companies.

“SpaceX and xAI combine…Tesla next? In our view there is a growing chance that Tesla will eventually be merged in some form into SpaceX/xAI over time. The view is this growing AI ecosystem will focus on Space and Earth together…..and Musk will look to combine forces,” Dan Ives, Global Head of Tech Research at Wedbush, posted on X earlier this week.

In a separate note, Ives said that “Tesla now is laser focused on autonomous and robotics in this key era for Musk & Co.” and predicted “more cross-pollination between Tesla and SpaceX over the coming year.”

He went further, arguing that Musk’s long-term objective may be consolidation.

“Musk wants to own and control more of the AI ecosystem and step by step the holy grail could be combining SpaceX and Tesla over the next 12 to 18 months in some form,” he wrote.

AI the common denominator between Tesla, SpaceX and xAI

Analysts say Tesla has increasingly repositioned itself as a “physical AI” company rather than a traditional automaker.

The company launched an AI-trained robo-taxi service in Austin, Texas, in June and plans to begin producing significant volumes of its humanoid robot, Optimus, later this year.

Analysts at Barclays wrote in a report on Thursday that while autos may still be the company’s core business, the end of the Model S and X “marks the symbolic baton pass” into “physical AI.”

“In case it wasn’t clear before, it’s more than abundantly clear now that Tesla is not an auto company,” the analysts wrote.

At the same time, SpaceX is expanding its ambitions beyond rockets and satellites.

The company intends to use capital from a potential IPO to accelerate the development of a space-based AI data centre business, positioning itself as a key infrastructure provider in the AI economy.

xAI, meanwhile, is building large-scale AI systems, including the Grok chatbot, which competes with OpenAI’s ChatGPT and Alphabet’s Gemini.

A history of corporate convergence

Although Musk has publicly dismissed merger speculation in the past, his corporate track record suggests a pattern of consolidation.

When an X user polled Tesla investors last year on whether the company should merge with xAI, Musk responded simply: “No.”

Over the years, however, Musk has repeatedly shown a tendency to integrate his businesses.

Before SpaceX’s merger with xAI, the latter was merged with X last March. Not to forget Tesla’s acquisition of SolarCity in 2016.

Musk himself has openly acknowledged that his companies are increasingly coming together.

“My companies are, surprisingly in some ways, trending toward convergence,” he wrote on X last November.

Market analysts say this convergence is becoming increasingly visible.

Chris Beauchamp, chief market analyst at IG, said, “Elon Musk has a clear ambition to bring all his companies under one umbrella. The merger is a big step in this direction.”

He added that it is “highly likely that Tesla and the SpaceX group will find themselves combined in due course once the latter has listed,” potentially consolidating Musk’s position as both a technological and financial powerhouse.

Dan Coatsworth, head of markets at AJ Bell, framed the idea in more colourful terms.

“Everything under one roof creates the idea of a Musk Metropolis – a vision of the future, with one man and a white cat wanting to rule the world,” he said, while noting that a single corporate structure could also help Musk manage his sprawling portfolio more efficiently.

Financial ties deepen across Musk’s companies

Beyond strategic rhetoric, the financial links among Musk’s companies have grown substantially in recent years.

Tesla announced a $2 billion stake in xAI in January and has established a framework to evaluate future collaborations.

SpaceX paid Tesla at least $2.5 million between 2024 and 2025 for commercial, licensing, and support agreements, while Tesla paid SpaceX $800,000 in 2024 to use an aircraft owned by the aerospace company.

xAI has also become a major customer of Tesla’s energy business, purchasing more than $620 million worth of Tesla’s Megapack batteries over the past two years to power its data centres.

Tesla has integrated xAI’s Grok chatbot into its electric vehicles and humanoid robots, further blurring the boundaries between the companies.

Morgan Stanley analyst Adam Jonas argued that these ties are strategically significant.

“Tesla’s relationship with xAI (financially and strategically) is deterministic to the long-term success of Tesla due in part to the natural synergies of data, software, hardware and manufacturing in recursive loops,” he said.

Implications for a SpaceX IPO

The prospect of a Tesla–SpaceX merger raises questions about whether SpaceX even needs to go public.

Russ Mould, investment director at AJ Bell, suggested that a combination could alter the IPO calculus.

“Speculation about a further combination with Tesla to build an effective MuskCorp, which could remove the need for a SpaceX IPO, has been bubbling away,” he said.

However, most analysts believe an IPO remains the more likely outcome in the near term. SpaceX has clear capital requirements, and preparations for a listing appear well advanced.

Ben Kallo of Baird argued that the acquisition of xAI could actually delay merger discussions.

He suggested that Musk’s immediate focus is likely to be on executing a SpaceX IPO targeted for mid-year, rather than pursuing a complex corporate restructuring.

Investor concerns and structural hurdles

Despite the strategic logic, a Tesla–SpaceX merger would face formidable financial and governance challenges.

Brian Mulberry of Zacks Investment Research told MarketWatch that Tesla’s energy business could provide a buffer for cash flows in a combined entity, and that Tesla could repurpose production lines to support both robotics and aerospace manufacturing.

“Bottom line, it makes sense to me but the financials would have to work out for the privately held shares currently in SpaceX,” he said.

However, others are more sceptical.

Gary Black, managing partner at The Future Fund, warned through a post on X that a merger would likely require Tesla to issue additional shares, diluting existing investors.

“We still believe that a shareholder vote to combine $TSLA with SpaceX / xAI would fail because of the potential huge dilution (~45%) to TSLA shareholders. TSLA can get numerous benefits from SpaceX / xAI without merging the companies. Math matters,” he said.

Black also said that all Tesla shareholders might not want to make a bet on space exploration and may sell their shares.

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