More than just rumors! SpaceX (SPCX.US) and Tesla (TSLA.US) open merger discussions, Musk bets on AI super collaboration

The Zhitong Finance App learned that Elon Musk said in response to analysts' questions during the SpaceX (SPCX.US) third-quarter earnings conference call on Tuesday that both SpaceX and Tesla (TSLA.US) have set up special committees to discuss the merger. His “merger is a good idea” response publicly supports this idea that could spawn one of the world's most valuable companies.

Although electric vehicle manufacturer Tesla and rocket company SpaceX were once viewed as two companies with basically independent businesses, the business boundaries between the two companies have gradually blurred as Musk continues to expand fields such as artificial intelligence (AI), robotics, advanced manufacturing, satellite communications, and computing infrastructure — including data centers on Earth and data centers that may be deployed in orbit in the future.

Although Musk thinks the merger of the two companies is a good idea, he also stated that shareholders must support the deal, especially on Tesla's side. He said, “We need to get 50% of the voting support of all shares, not just 50% of the shares that have already participated in the voting. In other words, it must be supported by 50% of the total number of shares held by all shareholders. That's a pretty high threshold.”

Why did Musk support the merger?

The merger will create a comprehensive enterprise centered on Musk's long-term vision, integrating AI, energy, robotics, communications, and transportation businesses into a technology and manufacturing empire spanning the Earth and beyond.

Musk said on Tuesday, “I really think there is great value in merging the two companies because we're basically already in the super-smart singularity phase. Cooperation can bring huge benefits in terms of super-intelligent software development, chip design, Terafab projects, robotics, large-scale delivery of materials into orbit using the Starmind constellation (orbital data center), and connectivity capabilities.”

Merging the two companies may also simplify the decision-making process. Many of Musk's projects already span multiple companies and require separate approval from different company boards and shareholders. The combined company will give management greater autonomy, enabling it to deploy capital, engineering talent, and infrastructure to areas where it sees the greatest potential for growth.

Musk has long believed that in order to advance Tesla's AI and robotics strategy, he needs to have more influence over Tesla. He holds nearly one-fifth of Tesla's shares and has voting control over SpaceX. And Tesla's merger with SpaceX may further consolidate and strengthen his influence.

What does this mean for investors?

Tesla shareholders will have the opportunity to participate in SpaceX's rapidly growing Starlink (Starlink) broadband business, rocket launch service business, and future space exploration projects. SpaceX investors will take ownership of Tesla's automotive, energy storage, autonomous driving, and robotics businesses.

The merged company may also rank among the most valuable companies in the world, with a market capitalization of around $3.5 trillion, and integrate their leading positions in the fields of automobiles, robotics, satellite communications, rocket launch services, energy storage, and AI infrastructure.

Proponents may believe that as businesses become more interdependent, the merged company will be able to allocate capital more efficiently between different businesses. Critics, however, argue that investors will incur a wider range of technical, regulatory, and enforcement risks, some of which have little correlation with each other.

In what areas can SpaceX and Tesla collaborate?

Starlink satellites can provide communication connections for Tesla's autonomous taxis, autonomous driving systems, and future generations of Optimus humanoid robots. Tesla's battery and energy storage products can help meet SpaceX's growing electricity needs, including future data center projects.

Musk has announced an important cooperation project between SpaceX and Tesla — TeraFab. This is a semiconductor and AI computing project that aims to produce advanced chips to meet the development needs of Tesla's autonomous vehicles and Optimus robots, as well as SpaceX's AI and data center businesses. Musk hopes that large-scale mass production of the project will begin before the end of 2028.

Tesla's expertise in large-scale factory automation can complement SpaceX's efforts to industrialize Starship (Starship) production. Meanwhile, SpaceX's technology has already been applied to Tesla products, and most notably, Tesla plans to use components derived from rocket technology in the next generation Roadster sports car.

The merged company can also coordinate the layout of the strategic supply chain, combining Tesla's scale advantage in the fields of batteries, semiconductors, and manufacturing equipment with SpaceX's demand for specialty metals, electronic components, propulsion system components, and satellite hardware.

What are the potential downside risks?

The biggest challenges are likely to come from geopolitical and regulatory aspects. SpaceX is an important contractor for the US military, intelligence agencies, and the National Aeronautics and Space Administration (NASA). At the same time, Tesla still has deep ties to the Chinese market, and its Shanghai plant plays an important role in automobile production and sales. This combination of businesses is likely to attract more stringent scrutiny from US regulators and national security officials.

The merger will also face hurdles in shareholder approval and corporate governance. Investors need to believe that merging two companies with already complex business structures can create more value than maintaining independent operations. Questions about conflicts of interest, voting control, and capital allocation will inevitably follow.

Additionally, there are implementation risks. Starships, autonomous taxis, humanoid robots, AI data centers, mobile communications, and rail infrastructure are all expensive and technologically difficult investment projects. Merging Tesla with SpaceX will not reduce these risks; it will only concentrate them under the same company.