In a development that could reshape the landscape of modern technology and global finance, a prominent market analyst has forecasted a rising probability that Tesla Inc. (NASDAQ: TSLA) may eventually merge with Elon Musk’s other flagship ventures, SpaceX and xAI. This bold prediction follows the recent confirmation that SpaceX, the private aerospace manufacturer, has officially combined operations with xAI, Musk’s artificial intelligence startup.
Dan Ives, a Managing Director and Senior Equity Research Analyst at Wedbush Securities, issued a note to investors on Tuesday suggesting that the consolidation of Musk’s business empire is likely just beginning. According to Ives, the strategic alignment between space exploration, artificial intelligence, and sustainable energy transport is becoming increasingly evident, creating a pathway for a unified corporate structure within the next 12 to 18 months.
The speculation comes on the heels of Elon Musk’s confirmation regarding the SpaceX-xAI merger, a transaction that reportedly values the combined entity at a staggering $1.25 trillion. As the boundaries between Musk’s various companies blur, the financial world is now turning its attention to Tesla, the publicly traded electric vehicle giant, questioning its future role within this burgeoning "X" ecosystem.
The Wedbush Prediction: A Unified AI Ecosystem
Dan Ives has long been considered one of the most bullish voices on Wall Street regarding Tesla’s future. His latest analysis suggests that the separation between Musk’s ventures is becoming artificial in the face of their shared technological goals. Ives posits that a merger involving Tesla is not just a possibility but an increasingly likely outcome as Musk seeks to streamline operations and leverage synergies across his portfolio.
"In our view there is a growing chance that Tesla will eventually be merged in some form into SpaceX/xAI over time. The view is this growing AI ecosystem will focus on Space and Earth together…..and Musk will look to combine forces," Ives wrote in a post on the social media platform X.
The logic underpinning this prediction is rooted in the convergence of technologies. Tesla is not merely an automaker; it is a robotics and AI company, heavily invested in autonomous driving software (FSD) and the Optimus humanoid robot. Similarly, xAI is developing large language models and reasoning capabilities, while SpaceX provides the global connectivity infrastructure via Starlink and the heavy-lift capability via Starship to support massive computational needs.
Ives suggests that the timeline for such a monumental shift could be relatively short, spanning the next year and a half. This period would likely be defined by complex regulatory navigation and financial structuring, but the end goal appears to be a vertically integrated "super-company" capable of dominating multiple sectors simultaneously.
The Precedent: The SpaceX and xAI Merger
The catalyst for this renewed speculation was the formal confirmation regarding SpaceX and xAI. Late Monday, Elon Musk verified that the two private companies had combined forces. This merger is designed to create a platform that seamlessly integrates artificial intelligence with orbital logistics, satellite internet, and real-time data processing.
In a post on SpaceX’s official website, Musk elaborated on the strategic vision behind this combination. He stated that the merged entity aims to enable space-based AI compute. This concept leverages the unique environment of space—specifically the abundance of solar energy and the cold vacuum for thermal management—to power data centers.
Musk claimed that within two to three years, space could become the lowest-cost environment for generating AI processing power. By moving data centers to orbit, the company could bypass the terrestrial constraints of power grid limitations and cooling costs, which are currently major bottlenecks for the AI industry.
The valuation of this new SpaceX-xAI entity, cited at approximately $1.25 trillion, places it among the most valuable companies in the world, rivaling the market capitalizations of established tech giants. This massive valuation provides the financial leverage necessary to consider absorbing a company the size of Tesla, which currently holds a market cap fluctuating around the $700 billion to $900 billion mark.
Tesla’s Increasing Exposure to xAI
Before any formal merger talks have even begun, Tesla has already signaled its deepening financial and operational ties to xAI. In its recent Fourth Quarter and Fiscal Year 2025 update letter, Tesla announced a significant $2 billion investment into the AI startup. This move was ratified by the Tesla board and seemingly supported by shareholders, despite concerns regarding corporate governance and the allocation of capital to related parties.
This investment serves as a tangible link between the entities. Tesla utilizes AI for its Full Self-Driving (FSD) suite, which requires immense training compute. xAI, with its access to thousands of NVIDIA H100 and upcoming H200 GPUs, possesses the computational horsepower that Tesla needs. Conversely, Tesla provides real-world data from its fleet of millions of vehicles, a dataset invaluable for training AI models to understand physics and human behavior.
If a merger were to occur, it would formalize these relationships, eliminating the friction of arm's-length transactions and allowing for the free flow of intellectual property, talent, and capital between the automotive, aerospace, and software divisions.
Strategic Synergies: Earth and Space Combined
The potential consolidation of Tesla, SpaceX, and xAI represents a vision of a "Master Plan" that extends beyond sustainable energy. The synergies discussed by analysts include:
- Shared Compute Resources: Tesla’s Dojo supercomputer and xAI’s "Colossus" cluster could be unified to solve general purpose AI and autonomous navigation simultaneously.
- Robotics: Tesla’s Optimus robot relies on advanced AI for motor control and reasoning. xAI’s Grok model could serve as the cognitive "brain" for these robots, while SpaceX could utilize them for manufacturing on Earth and eventually for operations on Mars.
- Connectivity: Tesla vehicles already connect to LTE networks, but direct-to-cell Starlink integration (a SpaceX product) would ensure Tesla vehicles remain connected anywhere on the planet, facilitating over-the-air updates and autonomous coordination even in remote areas.
- Materials and Manufacturing: SpaceX and Tesla already share expertise in materials science, such as the proprietary distinct steel alloys used in both the Cybertruck and the Starship rocket. A merger would further streamline supply chains and manufacturing engineering.
The "X" Conglomerate Vision
Elon Musk has made no secret of his admiration for the "everything app" model seen in markets like China (e.g., WeChat) and the broader concept of a holding company similar to Berkshire Hathaway or Alphabet, but with a focus on deep technology and engineering. He has previously established "X Holdings Corp" as a parent entity for his acquisition of Twitter (now X).
Bringing Tesla, SpaceX, and xAI under a single corporate umbrella would effectively create the world's largest and most diversified deep-tech conglomerate. It would control critical infrastructure in transportation (Tesla), telecommunications (Starlink), aerospace (SpaceX), and intelligence (xAI). This centralization of power and capability aligns with Musk’s long-term management style, which favors tight control and rapid cross-pollination of ideas between his teams.
Significant Hurdles: The Geopolitical and Regulatory Maze
While the strategic logic of a merger might appeal to Musk and bullish analysts like Ives, the execution of such a deal would face monumental hurdles, primarily in the realms of regulation and geopolitics. As noted in reports from Investors Business Daily, the operational footprints of SpaceX and Tesla are vastly different regarding government relations.
The China Dilemma
Tesla maintains extensive operations in China, its second-largest market. The Gigafactory in Shanghai is a crucial export hub, and the company is currently expanding its energy storage business with a new Megapack facility in the region. Tesla’s success is deeply intertwined with its relationship with the Chinese government and supply chain.
In stark contrast, SpaceX is effectively barred from operating in China due to the sensitive nature of rocket technology, which is classified under U.S. International Traffic in Arms Regulations (ITAR). Furthermore, SpaceX is a major defense contractor for the U.S. government, holding billions of dollars in contracts with NASA and the Department of Defense. xAI’s technology, particularly the Grok AI model, is also reportedly being utilized by U.S. defense agencies.
Merging a company with deep ties to Beijing (Tesla) with a company that is a pillar of U.S. national security (SpaceX) would trigger intense scrutiny from the Committee on Foreign Investment in the United States (CFIUS). It is unclear whether U.S. regulators would allow a defense contractor of SpaceX's caliber to merge with a public entity heavily exposed to Chinese regulatory influence. Conversely, Beijing might view the merger as a national security threat, potentially jeopardizing Tesla’s operations in China.
Public vs. Private Valuation
Another complication lies in the corporate structure. Tesla is a publicly traded company subject to quarterly reporting, SEC oversight, and shareholder votes. SpaceX and xAI are private entities that have enjoyed the freedom to pursue long-term goals without the pressure of short-term earnings targets.
A merger would force a decision: take Tesla private, or bring the massive SpaceX-xAI entity public. Taking Tesla private would require an unprecedented amount of capital, likely exceeding $700 billion. Conversely, a reverse merger bringing SpaceX public via Tesla would expose Musk’s Mars colonization plans to the volatility of the public markets and the scrutiny of short sellers—something Musk has famously expressed disdain for.
Market Implications and Investor Sentiment
The reaction to Ives' prediction has been mixed. For Tesla bulls, the prospect of owning a piece of SpaceX and xAI through their TSLA shares is a dream scenario. SpaceX is widely regarded as one of the most innovative companies in history, and retail investors have clamored for an IPO for years. A merger would instantly unlock this value for Tesla shareholders.
However, institutional investors may view the move with skepticism. Concerns regarding "conglomerate discount"—where a diversified group trades at a lower valuation than the sum of its parts—could arise. Furthermore, governance concerns regarding Musk’s control and potential conflicts of interest would likely intensify. The recent lawsuit regarding Musk’s Tesla compensation package highlighted shareholder sensitivity to board independence, a topic that would undoubtedly resurface in any merger discussions.
Despite these challenges, the market acknowledges that betting against Musk’s ability to engineer complex financial and structural pivots has historically been a losing strategy. If the SpaceX-xAI merger proves successful in generating the promised "space-based AI compute," the economic gravity of the combined entity might become too large for Tesla to ignore.
Conclusion
As the boundaries of technology expand from the roads of Earth to the orbit of Mars, the corporate structures that house these innovations appear poised for evolution. Dan Ives’ prediction of a Tesla merger with SpaceX and xAI highlights a potential future where energy, transport, spaceflight, and artificial intelligence are not separate industries, but facets of a singular, vertically integrated ecosystem.
While the regulatory and geopolitical barriers are formidable, particularly regarding the dichotomy between U.S. defense interests and Chinese manufacturing, the momentum of Musk’s "X" empire suggests that consolidation is the ultimate objective. For investors and industry watchers, the next 12 to 18 months will be critical in determining whether this grand unification becomes reality or remains a theoretical vision of the future.
