Elon Musk said on Tuesday that the boards of SpaceX and Tesla have formed special committees to study a merger of his two largest companies, a deal that would bring together rockets, electric cars, humanoid robots, a social network and the chatbot Grok under a single corporation valued at roughly $3.5 trillion.
"I think there's a lot of merit to combining the companies, given that we're pretty much at the superintelligence singularity," Musk said on SpaceX's third-quarter earnings call. The singularity is a term used in Silicon Valley to describe the point at which artificial intelligence surpasses human capability and begins improving itself faster than anyone can keep up with.
He then listed what the two companies would share: "superintelligence software, chip design, the Terafab obviously, robotics, mass transport to orbit with the Starmind constellation, and connectivity."
In other words, that means AI models, custom chips, a giant chip factory, robots and satellites that function as orbital data centres.
If the merger goes ahead, a single company — with one man holding the majority of the votes — would own a leading AI chatbot, the social network that feeds it data, the satellites that connect it, the factory that makes its chips, and the cars and robots it is meant to control.
Nothing has been signed, and Musk warned that assuming a merger is a certainty "would be an overstatement." If you hold an S&P 500 index fund, you already own a small stake in Tesla — not in SpaceX — and in an all-stock deal, those shares would likely be swapped for shares in the combined company.
This would be Musk's third consolidation since March 2025, when xAI absorbed X (formerly Twitter). In February, SpaceX absorbed xAI in a deal that valued the AI company at $250 billion, weeks after Tesla invested about $2 billion in it; in June, SpaceX went public in the largest initial public offering (IPO) in history.
SpaceX reported third-quarter revenue of $14.58 billion on Tuesday, well above the $12.72 billion analysts had expected. The company also posted its first quarterly profit since going public, due in large part to renting out the computing power of its AI data centres to companies such as Anthropic and Google.
The most ambitious project is Starmind, SpaceX's plan to put AI data centres in orbit. The company has asked US regulators to approve as many as 1 million satellites that would run AI models with near-constant sunlight, and Musk expects deployments to begin in late 2027 and reach "meaningful scale" in 2028.
Musk's argument is that Earth is running out of space and electricity for AI, and the politics back him up. An Annenberg survey found that 61% of Americans now oppose new data centres in their areas, and about $130 billion in projects were blocked or delayed in the first quarter of 2026 alone.
SpaceX's IPO documents, however, warned investors that orbital AI computing relies on "unproven technologies" and "may not achieve commercial viability." Tesla's main contribution would be the Terafab, a $16.8 billion chip plant the two companies are building in Texas to supply the Optimus robots, Cybercab robotaxis and these space-based data centres.
Musk is not the first to look beyond dry land to keep servers cool. Microsoft's Project Natick submerged 855 servers off the coast of Scotland in 2018. Over two years, only six failed, a 0.7% failure rate against 5.9% for a comparable land-based group, but Microsoft shelved the programme anyway, with cloud operations chief Noelle Walsh saying: "I'm not going to build subsea data centres anywhere in the world."
China has embraced the idea with a wind-powered underwater data centre about ten kilometres off Shanghai that, according to builder HiCloud, uses at least 30% less electricity than its land-based rivals. Meanwhile, the startup Lonestar plans to launch a small data storage unit towards the Moon in early 2025.
Wall Street mostly likes the idea, provided the price is right. "We believe this is a no-brainer for both SpaceX and Tesla; it all comes down to the price for shareholders," Dan Ives of Yorkville Ives & Co. told Reuters, estimating that Tesla shares would need to be valued at around $550 each — a premium over the market price large enough to secure approval.
Tesla shares rose nearly 4% after Elon Musk's remarks. His words moved Tesla's stock more than the unveiling of a flying car did, given that the share price fell after that demonstration.
Even with nothing guaranteed, markets are flirting with the idea. Gene Munster, a Tesla investor and asset manager at Deepwater Asset Management, now puts the odds of a deal closing within two years at 95%.
SpaceX is also a major contractor for the US armed forces, intelligence agencies and NASA, while Tesla relies heavily on its Shanghai factory — a combination that, according to Reuters, could draw scrutiny from both Washington and Beijing on national security grounds.
A merger would also give Musk the tighter grip on Tesla he has long sought. He holds about 20% of Tesla, but controls most of SpaceX's votes through dual-class shares that carry extra voting power, and Barclays estimates he would hold around 56% of the votes in a combined company.
SpaceX reacted far more favourably, with a 10% gain, its best move since June.
Any deal would still need the backing of 50% of all Tesla shares outstanding, not just the shares voted, a target Musk described as "quite a difficult hurdle to clear." Last week, Barclays suggested an announcement could come before Tesla's annual shareholder meeting on 3 December.
* Translated and edited with permission from Decrypt.
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