SpaceX explores Tesla merger as Musk backs company talks

Elon Musk says SpaceX and Tesla have formed committees to discuss a merger, putting independent directors in charge of possible deal terms.

Speaking to investors on October 20, Musk endorsed a combination but said the committees had reached no agreement on terms. He cautioned that negotiations might never produce a transaction, distinguishing his support from a decision by either company.

Independent directors hold the negotiating mandate

Musk described a merger as "a good idea" while acknowledging his conflicting interests. He said he could not participate in the committees' deliberations and identified their members as independent directors.

Shareholders had requested the committees and would also have to approve any agreement, Musk said. His account places negotiations with the directors rather than with the executive advocating a combination.

The ownership stakes make that distinction important: the supplied account puts Musk's Tesla holding at nearly 20%, compared with slightly less than 50% of SpaceX. It provides no proposed exchange ratio, valuation or other terms for assessing the consequences for either shareholder group.

SpaceX shares gained 8% during after-hours trading following the comments, compared with a 1.8% increase for Tesla, according to the supplied account. Those moves accompanied discussion of a possible transaction, not an announced agreement.

SpaceX revenue shifts toward computing capacity

The discussions coincide with a change in SpaceX's revenue mix. Its reported results for the quarter ending September 30 showed revenue of $14.58 billion, an increase of 161% from the comparable period a year earlier.

Reported AI revenue reached $7.56 billion, nearly tenfold its year-earlier level. Most came from providing computing capacity to customers including Anthropic, Alphabet's Google and Reflection AI, rather than selling access to SpaceX's own models.

That business differs from developing AI software: customers rent infrastructure on which to run their work. The supplied account describes Starlink's internet operation as SpaceX's longstanding financial foundation, while regular Starship operations remain central to its longer-term plans.

The reported growth also came with higher investment requirements. Capital expenditure reached $19.6 billion, almost three times the year-earlier figure, leaving infrastructure spending above quarterly revenue despite the company's reported first profit since becoming publicly traded.

Musk forecast annual recurring revenue between $500 billion and $1 trillion by the close of 2027. That projection is not directly comparable with the reported quarterly revenue figure, and the supplied material offers no reconciliation or independent assessment of the target.

Terafab connects the companies before any deal

Musk pointed to potential cooperation spanning AI software, semiconductor design, robotics, connectivity and orbital infrastructure. Those are his arguments for combining the businesses, not quantified savings or benefits established by the committees.

The companies already share Terafab, a semiconductor manufacturing venture. Musk put its initial test-chip milestone around May or June next year and targeted large-scale production for the third quarter of 2028; both dates remain company objectives rather than completed milestones.

If directors negotiate acceptable terms, shareholders would face a decision about combining businesses with different operations and investment demands. If negotiations end without agreement, Terafab remains an existing link between them; the immediate unresolved issues are transaction terms, committee approval and whether any proposal reaches shareholders.