Musk: Merger of SpaceX and Tesla is a good idea

US businessman Elon Musk said that a merger of his companies, SpaceX and Tesla, would be a “good idea” and that both have formed special committees to discuss the matter, leading to an eight percent rise in the space and technology company’s shares during after-hours trading.

The company had announced earlier on Tuesday its first profits since its stock market listing. Musk said he expects recurring annual revenues ranging from $500 billion to $1 trillion by the end of 2027, driven by rising demand for its data center spaces thanks to the boom in artificial intelligence.

Musk has previously piqued shareholders’ interest in the idea of merging SpaceX and Tesla, pointing to increasing overlap between the two.

Speculation about a potential acquisition of the electric carmaker by the space company has gained momentum recently, with Barclays Bank last week suggesting that a deal could be announced before Tesla’s annual meeting in December.

Musk provided the first official confirmation that the two companies are in talks, saying, “I think it would be a good idea, but the decision ultimately rests with the special committees of the two companies.”

He added, addressing investors during a conference call, “Since I am a party with conflicting interests, I cannot actually participate in the special committees’ discussions,” which consist of independent board members.

He clarified that the two companies formed the special committees at the request of shareholders, who will ultimately have to approve the deal.

He continued: “I truly believe there are significant benefits to merging the two companies, as we are approaching a point of superintelligence singularity. There is much to be gained from collaborating on the development of superintelligence software, chip design, the TerraFab project, of course, robots, launching payloads from Earth to orbit using the Starship project, and connectivity.”

During the call, Musk confirmed that TerraFab, the joint chip manufacturing venture between the two companies, is scheduled to produce its first prototype chip in May or June of next year, aiming to reach mass production by the third quarter of 2028.

Tesla shares rose 1.8 percent during after-hours trading.

Musk, the world’s richest person, owns nearly one-fifth of Tesla’s shares and slightly less than half of SpaceX’s shares. Analysts say the merger would give him control over the combined entity.

SpaceX announced on Tuesday a 161 percent jump in its revenues, reaching $14.58 billion in the third quarter compared to the same period last year.

AI-related revenues surged nearly tenfold to $7.56 billion, primarily from leasing data center capacity to developers such as Anthropic, Google, and Reflection AI, rather than from its own models.

The third quarter provided the clearest evidence yet that SpaceX’s massive investments in AI are translating into revenue, even as it continues to spend heavily on computational infrastructure, with capital expenditures nearly tripling to $19.6 billion.

The company’s AI operations extend to the Grok model, the social media platform X, and rapidly growing data center operations. These businesses turned a profit in the third quarter, compared to a loss in the same period last year.

SpaceX recorded a net income of $4.4 billion, compared to a net loss of $1.1 billion a year ago. Analysts’ expectations pointed to a profit of $1.57 billion.

The number of Starlink subscribers reached 13.6 million in the third quarter, surpassing analysts’ expectations of 12.19 million subscribers. However, this growth has come at a cost: the average monthly revenue per subscriber fell from $99 in 2023 to $69 in the third quarter, as the company expanded into international markets by offering cheaper plans.

Starship, SpaceX’s next-generation reusable rocket system, has not yet entered commercial service. The system is expected to enable the deployment of higher-bandwidth Starlink satellites and AI-based computing infrastructure in orbit.

SpaceX’s ability to reliably convert Starship into a reusable vehicle is fundamental to its long-term strategy.