Tesla Shares Rose 3.4% After Musk Backed a SpaceX Merger

Elon Musk said a merger of Tesla and SpaceX is "a good idea" with "a lot of merit."

Musk made the remarks Oct. 20 during a conference call with investment analysts to discuss SpaceX's third-quarter financial results. The comments came after a participant on the call noted there was "a lot of anticipation" of such a deal. Tesla shares gained about 3.4% the following day.

Musk disclosed during the call that both Tesla and SpaceX had empaneled special committees of independent directors to consider a transaction. He said a merger would require shareholder approval at both companies, including approval from more than 50% of Tesla shareholders. Musk owned about 20% of Tesla shares as of Sept. 30, making him the largest single shareholder. A combination of the two companies would create a firm valued at $3.5 trillion, which would rank as the fifth-largest company in the United States by market value, according to Reuters.

Musk cited artificial intelligence as a reason for the two firms to combine. "We are pretty much in the super-intelligence singularity," he said, "and there's a lot to be gained from cooperating on developing super-intelligent software, chip design, the Terafab, obviously robotic, mass to orbit with the Starmind constellation." The Terafab is an AI chip factory under joint development in Texas by Tesla, SpaceX and Intel. Its cost is estimated at as much as $120 billion, with construction scheduled to begin Dec. 1. Starmind refers to a plan to place AI data centers in space.

Questions about the deal's independence center on the overlap between the boards of the two companies. Tesla's directors include Ira Ehrenpreis, who also sits on the SpaceX board; Kimbal Musk, Elon Musk's brother; J. B. Straubel, a former Tesla executive who served on the SolarCity board; and board Chair Robyn Denholm. SpaceX's directors include Ehrenpreis, Antonio Gracias, who has served on the boards of Tesla, Boring Co. and SolarCity and currently sits on the Neuralink board; Stephen Jurvetson, a former Tesla director; and Roelof Bota and Luke Nosek, former PayPal executives. Musk told analysts the committee process amounted to a "kabuki dance where two groups of people are talking, and I can't be in the conversation."

Tesla shareholders have seen the company's shares fall nearly 13% in 2026. For the third quarter ended Sept. 30, Tesla profits declined 43% from the same period a year earlier, while operating expenses rose 39% year over year, according to the company's financial disclosure. In the first nine months of 2026, SpaceX's Starlink service recorded $5.2 billion in operating profit on $12.8 billion in revenue, while its rocket launching business lost $1.2 billion on $3.3 billion in revenue and its AI business lost $3.3 billion on $10.9 billion in sales. SpaceX spent $48.1 billion in capital over the same period, including $40 billion on AI.

Tesla and SpaceX already conduct business with one another. Tesla reported selling $430 million in Megapacks to its xAI and SpaceX and $143 million in vehicles to SpaceX in 2025. Engineers from Musk's companies were seconded to X after Musk bought the social media platform in 2022.

Musk has pursued a combination of his companies before. In 2016, Tesla merged with SolarCity, a rooftop solar provider Musk controlled. Tesla shares fell more than 10% the day after that deal was announced. At the time, four of Tesla's seven directors had close ties to Musk, and SolarCity's eight-member board included Musk and four other intimates.