Musk fuels Tesla-SpaceX merger speculation

Elon Musk declined to confirm whether Tesla and SpaceX could merge, but his answer on Tesla’s earnings call did little to cool speculation that the companies may eventually combine.

Tesla and SpaceX already share several projects. SpaceX acquired Musk’s artificial intelligence company xAI earlier this year in a $1.25 trillion deal, creating SpaceXAI within the combined company. The joint entity, known simply as SpaceX, then went public in a record $75 billion IPO earlier this summer, although its stock has declined since.

The companies' existing overlap includes the integration of SpaceXAI’s Grok chatbot into Tesla vehicles and a planned Texas chip factory called Terafab, a joint venture between the two companies.

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“Well, I mean, as you can tell from all the many collaborations on so many fronts with SpaceX, there’s more and more overlap, especially with the Terafab, that’s really going to be a gigantic project. But obviously, you know, we can’t talk about combining companies, that kind of thing, on earnings calls.”

Starlink, Grok and Tesla’s AI spending

Musk then outlined how SpaceX could support Tesla without directly addressing a merger. He said Starlink could provide broader connectivity for Tesla’s autonomous vehicles, including the Cybercab, even in areas he described as “Bermuda triangles with lack of cellular connectivity.” He also promoted plans to integrate Grok into Tesla’s Optimus robots through a project introduced earlier this year as Digital Optimus.

The response raised investor expectations. Gene Munster, co-founder and managing partner of investment company Deepwater, said on X that he had increased his estimate of a merger happening within the next few years from 80% to 90%.

Tesla’s latest results offered less certainty about the company’s financial position. Revenue exceeded expectations, but earnings per share fell well below market forecasts. Tesla expects to spend more than $25 billion this year, largely on AI, pushing free cash flow negative in the latest quarter.

“This is a massive capex year, but I’m confident that all the things that we’re investing in will yield incredible returns.”

Musk said he had instructed his team to spend “as fast as we can without it being too wasteful,” arguing that an emphasis on extremely high efficiency could slow innovation and production. He called the expansion “probably the fastest industrial scale up since World War II in America.”