Speculation about combining multiple companies owned by Elon Musk has circulated for years. Recent reporting that SpaceX is close to buying xAI has sharpened that discussion, with supporters saying a SpaceX-xAI transaction could clear a path toward Musk’s plan to operate powerful, space-based data centers. Such an arrangement would more easily fit the corporate governance and valuation realities of two private entities under common control.
SpaceX’s anticipated public offering later this year and Tesla’s ongoing operational transition are central to how investors and analysts view potential combinations. The proposed SpaceX-xAI move was described as likely smoother precisely because both companies are private and controlled by Musk, a factor that reduces the need for shareholder votes that typically accompany deals involving large public companies.
Sources cited in media accounts also said SpaceX has been weighing alternatives, including a merger with Tesla in addition to or instead of combining with xAI. A tie-up that included Tesla would normally trigger formal shareholder procedures - votes or tender offers - and could become a thorny process in certain instances. That said, Musk has, in the past, shown an ability to maintain investor support for his strategic direction at Tesla.
The strategic logic connecting the companies rests on their shared pursuit of artificial-intelligence capabilities. Tesla has positioned AI-driven autonomy and humanoid robots at the center of its long-term plan, while SpaceX’s contemplated orbiting data centers are intended to deliver the immense computing power required to support such applications. "If you’re trying to build robots, and build autonomous cars, and build rockets, these things all fit together," said Arthur Laffer Jr., president of Laffer Tengler Investments, who holds Tesla stock. He added that Mr. Musk views each company he controls as part of an "integrated solution."
Still, Tesla remains in the early phases of shifting its business model toward autonomy and robotics. That shift has been made more pressing by declines in EV sales over the past two years. For investors focused on near-term vehicle volume and profitability, the timing and shape of any major corporate combination involving Tesla raise questions.
For holders and analysts who favor a phased approach, a SpaceX-xAI deal is more intuitive. An acquisition of xAI by SpaceX would not necessarily delay a SpaceX IPO because xAI is substantially smaller and both are private enterprises under Musk’s control. In its most recent financing round, xAI raised $20 billion, surpassing a $15 billion target and arriving at a valuation of $230 billion. Reports have indicated SpaceX intends to go public this year with a valuation likely above $1 trillion.
Tesla, by contrast, is a publicly traded company with a market capitalization of more than $1.4 trillion; its shares rose 3.3% on Friday. That public status imposes different mechanics on any merger consideration, particularly around valuation transparency and shareholder protections. "History says that ultimately, most Tesla/SpaceX investors are invested for the sole sake of betting on Elon Musk," said Andrew Rocco, a stock strategist at Zacks Investment Research. He suggested a single corporate entity could concentrate Musk’s resources and attention.
Regulatory competition concerns would likely be limited if Tesla, xAI and SpaceX were brought together, according to William Kovacic, a former chairman of the Federal Trade Commission. Because the firms operate in distinct markets - automotive and robotics, AI software, and space-based infrastructure - a combined entity would not raise the same competition issues as a merger between direct competitors. Kovacic noted that competitors can still enter each of the companies’ markets, keeping a degree of market discipline intact.
Nevertheless, Tesla investors may be apprehensive about a deal that would involve the company taking on private assets. One worry is that Tesla shareholders could be required to pay what they perceive as an inflated price for SpaceX or for combined assets, especially if pricing is set with less transparency than exists for public companies. John Streur, senior managing partner at Boston Common Asset Management and a long-time Tesla observer who does not currently own shares, said combining Musk’s companies would involve numerous complications, including how to set private-company valuations. "If the valuations are extremely high it will be viewed as dilutive to Tesla shareholders," he warned.
Valuation mechanics are another sticking point. Tesla currently trades at a forward price-to-earnings ratio north of 200, a multiple far higher than those reported for large, fast-growing technology companies such as Meta Platforms, Microsoft or Alphabet, which have forward P/E ratios in the 25-to-35 range per the cited LSEG data. Accurately pricing an exchange involving a highly valued public company and one or more private firms can prove controversial.
Edward Best, co-chair of the capital markets practice at Willkie Farr & Gallagher, noted that if SpaceX completes an IPO before any deal with Tesla, valuation questions become easier to answer. A public valuation would provide at least one independent data point, he said, in contrast to private-company valuations where estimates can vary widely — "Is it $700 million, a trillion, a trillion-five? How do they value the company?"
Investors and market participants now face a set of choices about how to think of future combinations. A staged approach - starting with SpaceX and xAI - would align with current ownership structures and potentially avoid immediate shareholder votes or complex public-company dilution concerns. Folding Tesla into a larger Musk conglomerate would invite closer scrutiny from shareholders, require transparent valuation metrics, and likely provoke debate about whether the long-term synergies justify short-term dilution risks.
Summary
SpaceX’s possible acquisition of xAI would be administratively and financially simpler than a transaction that also brought Tesla into the fold, because both SpaceX and xAI are private and controlled by Elon Musk. Tesla’s public status, ongoing operational pivot toward autonomy and robotics, and high valuation introduce additional complexities for any merger that includes the automaker. Investors and legal experts point to valuation transparency and shareholder approval as key issues to resolve if Tesla were to be combined with SpaceX or other Musk-owned assets.