Tesla and SpaceX Explore Merger That Could Create $3.5 Trillion Giant

Elon Musk has backed the idea of merging Tesla and SpaceX, saying a combination of the electric vehicle maker and the aerospace company could strengthen their work in artificial intelligence, robotics and advanced chip manufacturing. However, the billionaire has cautioned that a deal is far from guaranteed, with independent committees at both companies now examining the proposal.

Speaking during SpaceX’s third-quarter earnings call on Tuesday, October 20, Musk said he saw considerable value in bringing the two businesses together. He said the companies had established special committees made up of independent directors to explore the possibility, following requests from shareholders. The committees have not agreed on transaction terms, and Musk said he could not participate in their discussions because of his position at both companies.

“I do think there’s a lot of merit to combining the companies,” Musk said, pointing to potential cooperation in artificial intelligence software, chip design, robotics, manufacturing and satellite connectivity. He also stressed that shareholders would ultimately have to support any proposed transaction.

A merger would unite Tesla’s electric vehicles, energy storage and robotics operations with SpaceX’s rocket launches, Starlink satellite internet and expanding artificial intelligence business. The companies have increasingly overlapping interests, including Terafab, a joint semiconductor manufacturing initiative intended to support AI computing and other advanced technologies. SpaceX is also pursuing plans for orbital data centres, while Tesla is investing heavily in autonomous driving and humanoid robots.

Based on the companies’ recent market valuations, a combined business could be worth around $3.5 trillion, potentially making it one of the largest corporate combinations ever contemplated. The figure is an estimate based on current valuations, not an agreed deal price. Neither company has announced a merger agreement, a proposed exchange ratio or a timetable for completing a transaction.

The immediate challenge is securing shareholder support, particularly at Tesla. Musk said the proposal would need approval from 50 per cent of Tesla’s shareholders, a threshold he described as difficult to achieve. He also acknowledged that speculation about a merger being inevitable was premature. At SpaceX, Musk holds substantially greater voting control than he does at Tesla, making the approval process and the balance of power within a combined company important questions for investors.

The structure of any deal is likely to draw scrutiny because Musk leads both companies and has a financial interest in each. The independent committees are intended to examine the proposal separately, although neither company has publicly announced the full terms of its review. Analysts have also raised questions about how a combined business would manage its different operations, capital requirements and regulatory obligations.

Musk’s comments came as SpaceX reported a strong third quarter, with net profit of $4.4 billion and revenue of $14.6 billion for the three months to the end of September. Revenue rose 161 per cent from a year earlier, according to the Associated Press, as the company’s satellite communications and AI businesses expanded. The AI business became SpaceX’s largest source of revenue in the quarter, while Starlink remained its biggest profit generator.

The company also reported substantial spending on infrastructure, with capital expenditure reaching $19.6 billion in the quarter and a further $35 billion to $40 billion forecast for the final three months of the year. Those investments underscore the scale of the computing and space infrastructure Musk wants to develop, but they also raise questions about how a combined company would finance and prioritise its projects.

Tesla’s investors, meanwhile, would be weighing the potential benefits of closer access to SpaceX’s technology against the risks of combining an automaker with a business that operates in launch services, satellite communications and government contracting. The companies’ overlapping AI and manufacturing ambitions offer a possible rationale for a merger, but a larger corporate structure would not automatically guarantee improved performance or returns.

For now, the proposal remains under review rather than a completed transaction. Its significance lies in the possibility of bringing electric vehicles, energy systems, robotics, satellite networks and AI infrastructure under one corporate roof. Whether that vision can translate into an agreement will depend on the independent committees’ recommendations, the deal’s terms, regulatory considerations and, ultimately, the willingness of shareholders to approve it.