SpaceX and Tesla have formally established special committees to evaluate a merger, a move that will effectively consolidate Elon Musk’s two largest public entities under a single corporate roof.
The timing is dizzying. This announcement lands just days after both companies released quarterly earnings that tell vastly different stories about their financial health. On one hand, SpaceX is preparing to borrow another $40 billion specifically to purchase Nvidia chips. On the other, Tesla just reported its second consecutive quarter of declining profits. Yet here we are, discussing a “superintelligence” merger while the hardware required to run it is still being negotiated in Texas.
The “Superintelligence” Pitch
“There’s a lot to be gained from cooperating on developing superintelligence software,”
Musk stated on SpaceX’s recent earnings call. He framed the union as a necessity for building autonomous robots capable of operating in deep space, where the latency between Earth and Mars makes remote control impossible. If you buy into the Mars narrative, the logic holds: Tesla builds the bodies (humanoid robots) and the data (self-driving cars); SpaceX builds the brains (LLMs) and the infrastructure (data centers).
But skepticism is the default setting for most investors. The “Mars mission” remains a fictional framework for many, serving primarily to justify Musk’s aggressive acquisition strategy. In reality, the merger consolidates control over a massive pile of assets, including Cursor, which SpaceX recently acquired. That single acquisition added $608 million in revenue to SpaceX’s Q3 bottom line. While Musk touts “increased Grok adoption,” analysts like Gil Luria at DA Davidson note that the bulk of that $7 billion in AI revenue likely comes from renting compute power to giants like Anthropic and Google, not from consumer-facing models.
Earnings That Don’t Add Up
The financials behind the merger are uneven at best. SpaceX reported $7.56 billion in Q3 revenue, with its “SI solutions & infrastructure” segment jumping to $7 billion. That’s triple the previous quarter’s figure. It looks impressive on paper, but it resembles the business model of CoreWeave—a compute broker—more than a frontier AI lab like Anthropic, which reportedly hit $16.3 billion in revenue in the first half of the year.
Tesla, meanwhile, is struggling. The company’s earnings “sucked,” according to one internal summary, as profits slid for the second straight quarter. Musk has signaled he’s losing interest in selling normal cars. The new Roadster is a tech demo, not a production vehicle, and won’t be available for years. The focus has shifted entirely to robots and self-driving taxis. A merger doesn’t fix Tesla’s core automotive profitability issue; it just buries it under SpaceX’s more lucrative cloud infrastructure numbers.
The Texas Chip Gamble
The real money is in the silicon. The two companies are already entangled in two joint ventures: Terafab and Macrohard. Terafab is a chip-making facility in Texas, partnered with Intel, designed to supply Musk’s companies with custom chips. Intel’s CEO, Thomas Hannaford, says the company is committed to the partnership, but the S-1 filing explicitly states that “details relating to our collaboration… have not been finalized.”
Musk claims Terafab will produce its first test chip in May or June 2027, with volume production in late 2028. Reuters noted wryly that “Musk has a history of setting timelines that his companies have missed.” That’s an understatement. The S-1 warns that a definitive agreement may never be signed. Meanwhile, the other project, Macrohard, is an AI tool that simulates Microsoft software. It’s a name that inspires dread, and the project has been nearly silent since its announcement in March.
Pay Packages and Power
Let’s not pretend this is purely about technology. The merger triggers specific pay package incentives for Musk, a detail that has drawn scrutiny from shareholders. Combining the companies increases his voting power and control over a portfolio that now includes a massive compute network, a robot fleet, and a rocket launch business. It’s a consolidation of power that few other CEOs in history have attempted at this scale.
What happens next?
The special committees will now begin due diligence. The next critical deadline is the May 2027 target for Terafab’s first test chip. If that slips, the entire “superintelligence” thesis weakens. Investors should watch for the formal merger agreement, which must be approved by both boards. The vote is expected to be contentious, given Tesla’s recent profit declines and the massive $40 billion debt load SpaceX is taking on to buy chips.
Frequently Asked Questions
Will the merger change the price of Tesla or SpaceX stock?
Not immediately. The formation of a committee is a preliminary step. Any impact on share price will depend on the valuation terms of the deal, which haven’t been disclosed. Given Tesla’s declining profits and SpaceX’s high debt, the exchange ratio will be a point of significant negotiation.
Is the AI business real or a hype cycle?
The revenue is real. SpaceX’s $7 billion in AI-related revenue is a concrete figure, largely driven by compute rentals. However, the “superintelligence” narrative is speculative. The technology for autonomous deep-space robots does not exist yet. The merger combines real infrastructure with futuristic branding.
Source: The Verge
This article was compiled by the IndiaBBCNews editorial system from verified international news sources. Facts have been independently reviewed. Original reporting: The Verge.
