Elon Musk has spent years building companies that appear to belong to different industries. Now, as artificial intelligence begins to reshape the economics of his business empire, the world’s richest person is considering whether he should make it one.
Musk said on Tuesday that combining SpaceX and Tesla would be “a good idea”, confirming for the first time that the two companies had established special committees to discuss a possible merger. The announcement sent SpaceX shares up 8 per cent in extended trading, while Tesla gained 1.8 per cent.
The prospect of a union would bring together an electric vehicle manufacturer struggling to define its next phase of growth with a space and satellite business increasingly powered by artificial intelligence. It could also consolidate Musk’s control over an extraordinary range of technologies, from autonomous machines and semiconductor manufacturing to global communications and computing infrastructure in orbit.
But Musk cautioned investors against treating a deal as inevitable. The independent committees had yet to agree on terms, he said, and might never reach an agreement.
“I think it would be a good idea, but it’s really up to the special committees of both companies,” Musk told investors on a conference call. He added that he was a “conflicted party” and could not participate in their discussions.
The committees were established at shareholders’ request, Musk said, meaning any eventual transaction would face scrutiny from investors whose interests may not necessarily align with his own.
Musk owns nearly a fifth of Tesla and just under half of SpaceX. A merger could give him control of a combined business that reaches from the factory floor to low-Earth orbit.
The AI engine changes everything
The discussions come as SpaceX undergoes a dramatic financial transformation.
The company reported revenue of $14.58bn for the three months to September 30, up 161 per cent from a year earlier. Net income reached $4.4bn, compared with a loss of $1.1bn in the same period last year, comfortably exceeding analysts’ expectations.
The most striking development was artificial intelligence. Revenue from the business surged almost tenfold to $7.56bn, largely driven by renting data-centre computing capacity to developers including Anthropic, Google and Reflection AI.
Musk told investors he expected annual recurring revenue of between $500bn and $1tn by the end of 2027, reflecting his confidence in the extraordinary growth potential of AI infrastructure.
The scale of that ambition comes with a formidable price tag. Capital expenditure nearly tripled to $19.6bn in the third quarter, while chief financial officer Bret Johnsen said spending could reach $35bn-$40bn in the fourth quarter.
“SpaceX delivered the quarter the bulls wanted, at least on the top line,” said Will Rhind, chief executive of asset manager GraniteShares. “The story now is all about AI.”
The figures suggest SpaceX is becoming something more complex than a rocket company. Its financial engine increasingly resembles that of a cloud-computing provider, while its longer-term plans depend on Starship becoming a reliable, reusable vehicle capable of carrying infrastructure into orbit.
One empire, multiple frontiers
Musk argues that combining SpaceX and Tesla could accelerate development across several overlapping technologies.
He pointed to “superintelligence software, chip design, the Terafab obviously, robotics, mass-to-orbit with the Starmind constellation, connectivity”.
Terafab, the proposed chip-manufacturing venture between the companies, is expected to produce its first test chip around May or June next year, with volume production targeted for the third quarter of 2028.
The strategic logic is clear enough. Tesla’s ambitions in robotics and autonomous driving require computing power and advanced chips. SpaceX offers satellite connectivity, launch capacity and a potential route towards orbital computing infrastructure. A combined organisation could coordinate investment across those fields rather than negotiate arrangements between separate companies.
Yet the breadth of the vision is also a source of risk. Integrating businesses with different capital requirements, regulatory obligations and shareholder constituencies could prove considerably harder than presenting them as complementary parts of a technological revolution.
A person familiar with the discussions told Reuters that talks had begun in recent weeks and could result in SpaceX acquiring Tesla. The person said Tesla had been working with an investment bank on the discussions.
No transaction terms have been agreed, and the direction of any deal remains uncertain.
SpaceX’s core satellite business provides a substantial foundation. Starlink had 13.6mn subscribers in the third quarter, exceeding analysts’ expectations of 12.19mn, supported by expansion into consumer, aviation, maritime, enterprise and government markets.
But growth has involved trade-offs. Average monthly revenue per subscriber has fallen from $99 in 2023 to $69 in the latest quarter as the company expands into markets where customers pay less.
Meanwhile, Starship has yet to enter commercial service. Its eventual success is central to plans for deploying more powerful Starlink satellites and establishing computing infrastructure in space, but development remains expensive and technically demanding.
For Tesla shareholders, a merger could provide access to a broader technological platform. It could equally expose them to greater capital demands and a business whose priorities extend far beyond selling vehicles.
The central question is whether the proposed union would unlock efficiencies unavailable to two separate companies — or concentrate too much financial and strategic risk in a single corporate structure.
Musk has built his career on persuading investors to finance technologies whose commercial potential initially seemed improbable. His latest proposition is more ambitious still: that cars, robots, chips, satellites and artificial intelligence should be treated not as separate markets, but as components of one integrated system.
SpaceX’s latest results suggest the money is beginning to follow that vision. Whether shareholders will agree to combine the empire behind it remains the next, and potentially decisive, test.
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