Investors and analysts are buzzing about the possibility of a SpaceX merger with Tesla, after CEO Elon Musk sounded bullish on the idea in the company's earnings call Tuesday night. He said both SpaceX and Tesla have formed special committees of independent directors to discuss the idea.
Analyst Dan Ives of Yorkville Ives put the chances of a merger by the end of 2027 at 80% to 90%.
Musk said on the call that the merger wasn't a certainty and would need the backing of holders of more than half of Tesla shares, "a high hurdle."
Musk also said he couldn't be involved in the talks because being chief executive of both companies makes him a conflicted party. A merger would hasten Musk's trillion-dollar payday.
But Ives argued in a note to clients Tuesday night that SpaceX and Tesla have a lot to gain from cooperating on software, chip design, robotics and connectivity.
Yuri Khodjamirian, chief investment officer at exchange-traded fund provider Tema ETFs, noted that the two companies are already working together on the AI-chip manufacturing project Terafab. Merging "brings together everything under one roof," Khodjamirian said. He called the committee formations "a positive sign that [Musk] is taking governance seriously."
Portfolio manager Michael Monaghan of Founder ETFs said Tesla's China operations might need to be formally separated or otherwise firewalled to address national-security concerns.
Other highlights from the earnings call:
SpaceX is profitable: The world's largest rocket company reported a profit of $4.4 billion in the third quarter. Artificial intelligence supercharged growth, though SpaceX also saw gains in its space and connectivity businesses.
SpaceX spending dramatically expanded: Capital expenditures exploded to nearly $20 billion, up from $6.9 billion in the same period last year, the company said. SpaceX is already making plans to sell new debt, on top of its $25 billion bond issue in June.
Musk predicts revenue will take off: SpaceX's annual recurring revenue will surpass $500 billion by the end of 2027 and could go as high as a trillion, he said. The company's third-quarter revenue was $14.6 billion.
Musk has been living in Memphis: The SpaceX CEO said he was spending four days a week at his facility in Memphis in an effort to get SpaceX's supercomputer cluster online.
Starbase Louisiana is expected to launch rockets in 2029: SpaceX's planned Louisiana launchpad, on what is currently a duck-hunting ground, is "highly likely" to be ready for rockets in three years, Musk said.