Tesla and SpaceX have each formed special committees of independent directors to explore a potential merger, Elon Musk disclosed on SpaceX's third-quarter earnings call on October 201,11. The combination would rank as the largest corporate tie-up of all time, uniting companies with a combined market value approaching $3.5 trillion2,13.
Musk, who serves as CEO and largest shareholder of both companies, endorsed the idea but stressed it is not a certainty. "I do think there's a lot of merit to combining the companies," he said, citing potential benefits in AI software, chips, robotics and orbital infrastructure5. He added that he is recused from the committee discussions because of his conflict of interest3.
AI as the merger thesis
The AI overlap between the two companies is the deal's central rationale. SpaceX reported that its AI division generated roughly $7.6 billion in third-quarter revenue, overtaking its Starlink-led connectivity business as the company's largest revenue source8. SpaceX said its AI business grew ninefold in a year. Total quarterly revenue reached $14.58 billion, a 161% year-over-year increase, and SpaceX swung to a net profit of approximately $4.4 billion from a $541 million loss in the prior quarter12.
Musk pointed to Terrafab, a chip manufacturing joint venture between the two companies, as an example of merger synergy. He said the venture plans to produce its first test chip around May or June 2027, with mass production targeted by the third quarter of 2028. He framed the merger around what he called the "superintelligence singularity," arguing that cooperation on developing superintelligence software would yield significant gains.
Shareholder and regulatory hurdles
Musk cautioned that approval is far from guaranteed. He noted that 50% of all Tesla shares, not just those cast in a vote, would need to approve the deal, calling that a "high hurdle"10. No formal merger agreement has been announced, and any transaction would face regulatory scrutiny6.
Tech analyst Gene Munster of Deepwater Asset Management said he believes there is a 95% chance a deal will take place within two years. Barclays analysts had suggested before the call that a merger could be announced ahead of Tesla's annual shareholder meeting in December. Tesla is scheduled to report its own quarterly results on October 21.
SpaceX shares rose approximately 4% to $154 in after-hours trading following the earnings report, while Tesla climbed 1.2%.
ANALYSIS SpaceX's AI division surpassing Starlink as the company's top revenue line reframes the merger discussion: the deal is less about pairing cars with rockets than about consolidating two large-scale AI and compute operations under a single corporate structure. The Terrafab joint venture already binds the companies at the silicon level, and a full merger would eliminate the governance complexity of coordinating across separate boards.
The merger exploration follows Tesla's disclosure that its third-generation Optimus humanoid robot is production-ready[1], and arrives during the earnings week that Barclays had flagged as a potential catalyst for merger news[2]. Tesla reports quarterly results on October 21.