Tesla-SpaceX Merger Odds Raised to 90% by Deepwater's Munster After Musk Comments

The likelihood of a merger between Tesla (TSLA) and SpaceX has been raised to 90% by Gene Munster, managing partner at Deepwater Management. The analyst increased his forecast from a previous 80% following comments made by CEO Elon Musk during Tesla's second-quarter earnings call.

Musk's Remarks Fuel Speculation

During the call, Musk acknowledged the increasing operational ties between his two companies when asked about a potential combination. "As you can tell from all the many collaborations on so many fronts with SpaceX, there’s more and more overlap, especially with Terafab," Musk stated. He added that any discussion of a merger would need to follow an "appropriate process" and could not be conducted on an earnings call.

In a post on the social media platform X, Munster said he was surprised the question was "even entertained" and noted that Musk touted the benefits the companies offer each other. This direct engagement with the topic prompted Munster to raise his probability assessment for a merger within the next few years.

Deepening Corporate Overlap

Speculation about a formal tie-up is underpinned by existing commercial relationships and shared ventures between the electric vehicle maker and the aerospace firm. Key areas of collaboration include:

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• Energy and AI: SpaceX utilizes Tesla’s battery storage systems for its artificial intelligence data centers.
• Product Integration: Tesla has integrated SpaceX’s Grok AI assistant into its vehicles.
• Venture Backing: Both companies are involved with Terafab, a chipmaking venture.

This growing synergy provides a strategic rationale for a potential corporate consolidation, which has been a topic of market discussion for months, particularly after SpaceX's public market debut in June.

Historical Precedent and Market Context

Elon Musk has a history of combining his corporate interests. In 2016, Tesla acquired SolarCity, a company where Musk was chairman, in a deal that later faced a shareholder lawsuit that was ultimately ruled in Musk's favor in 2022. More recently, Musk folded his artificial intelligence firm xAI into SpaceX before the rocket maker's initial public offering.

The discussion comes as both companies navigate market challenges. Following its June IPO, SpaceX's valuation has fallen by as much as $1 trillion from a peak of $2.6 trillion. Meanwhile, Tesla shares fell nearly 4% in aftermarket trading after its Q2 results missed profit estimates and the company reported negative free cash flow.