SpaceX-Tesla merger chatter reignites as Musk rocket company nears IPO

As Elon Musk prepares to lead a second trillion-dollar company into the public market, a move that will likely put him in charge of two of the 10 most valuable U.S. enterprises, chatter is building that Musk’s ultimate goal is to combine the entities into one.

SpaceX is expected to start trading on the Nasdaq in just over two weeks after obtaining a private market valuation of $1.25 trillion earlier this year, when it merged with xAI, Musk’s artificial intelligence company. Tesla’s market cap currently sits at around $1.6 trillion.

The two companies already have a laundry list of shared resources, and Musk has discussed with colleagues the possibility of folding the companies together, according to people familiar with the talks who asked not to be named due to the sensitivity of the topic.

A current Tesla employee told CNBC that many workers at the electric vehicle company have long expected such a transaction to eventually take place and that the topic is openly discussed internally. Another person close to the company said that shared challenges tied to power and compute constraints have led to regular collaborations.

While a company launching rockets based on contracts with the government may not seem to have a lot in common with an EV manufacturer, both of the businesses are increasingly focused on AI and the talent and computing resources necessary to build AI infrastructure and services. More than three-quarters of SpaceX’s $10.1 billion in capital expenditures in the first quarter were tied to AI, and Tesla said in its latest earnings report that capex will roughly triple this year, topping $25 billion.

“Tesla has to run powerful AI systems inside a moving vehicle with tight limits on power, cooling, latency, reliability and cost,” said Tomasz Tunguz, a former engineer who’s now a venture capitalist at Theory Ventures. “SpaceX has to think about compute in orbit, where radiation, thermal cycling, launch mass, power generation and heat rejection all become existential design constraints.”

Tunguz said a potential merger has captured the attention of tech enthusiasts in Silicon Valley, but he concedes that a deal of that size would be “complex.”

Representatives from SpaceX and Tesla didn’t respond to requests for comment.

Musk, the world’s richest person, is set to kick off SpaceX’s roadshow next week, as he tries to sell Wall Street on the promises of the 24-year-old company that’s already a big conglomerate. It consists of the reusable rocket business, the Starlink internet satellite service and xAI, which includes social media site X, formerly known as Twitter. SpaceX also has an agreement on the table to purchase AI coding startup Cursor for $60 billion.

“I think it’s been proven by Elon himself,” said Tejpaul Bhatia, a longtime SpaceX investor and CEO of Nebex, a startup that’s creating the financial infrastructure for space-related transactions. “Parallel entrepreneurship seems to work for him.”