Key Points
Tesla and SpaceX may merge to share resources on similar projects.
Musk has discussed the possibility with colleagues, according to reports.
Betting markets are saying a merger is more likely than not.
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SpaceX is going public this week, in what is not only the biggest initial public offering (IPO) of the year but also the largest in history. And yet, it may pale in comparison to a potential merger with Elon Musk's other technology company, Tesla (NASDAQ: TSLA). Yes, it is not implausible that these two trillion-dollar businesses could merge within the next 12 months, putting the entire Musk empire under one corporate umbrella.
In fact, there are many benefits that may lead to an announcement of a merger sooner rather than later. Here are five reasons Tesla and SpaceX will merge within the next year.
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1. The two companies have a joint Terafab project planned
Aside from some small sales between the companies, Tesla and SpaceX have never pursued a joint business project. That will change with the upcoming Terafab, a proposed semiconductor manufacturing facility in Texas being built by Tesla and SpaceX, in partnership with Intel.
Both companies need massive amounts of semiconductor capacity to pursue their ambitions, such as Tesla's autonomous driving or SpaceX's artificial intelligence (AI) data centers in orbit. If both companies are contributing to computer chip manufacturing at Terafab, Musk and other shareholders may have another reason to pursue a merger.
2. SpaceX may need Tesla's cash
SpaceX has ambitious plans to invest in capital projects, both on Earth and in orbit. These include data centers, its newest rocket called Starship, and orbital data centers. It spent over $10 billion on capital expenditures in the first quarter of 2026 alone, burning $9 billion in free cash flow in the process.
Even if it raises $75 billion in the IPO -- its stated goal -- the company is on pace to run out of funds within two years. One company that could help is Tesla, which has $45 billion in cash on its balance sheet. In order to fulfill the vision for both businesses, it might make sense for Musk to merge these balance sheets into one corporation.
3. Tesla and SpaceX have overlapping use cases
There may be redundancies if both Tesla and SpaceX are investing in AI infrastructure and software services. For example, SpaceX runs the xAI lab, which houses the Grok chatbot, a competitor to OpenAI and Anthropic. Tesla has been investing in AI systems for both its self-driving cars and Optimus humanoid robot.
There may be increasing overlap and benefits for AI systems to be trained under one model, with one giant team of scientists and engineers, leading to more efficiency and better outcomes for the combined business.
4. Musk's reported discussions with colleagues
The fourth reason SpaceX and Tesla may merge is rumored discussions from Musk himself. While he has never publicly stated that he plans to merge the two businesses, CNBC recently reported that Musk has discussed the possibility with colleagues.
Don't think this means a merger is guaranteed. The idiosyncratic Musk tends to change his mind. A lot. But the fact that he has discussed the possibility internally at his businesses means a merger may happen sooner rather than later.
Data by YCharts.
5. The betting markets say it could happen
Lastly, we can look at live betting odds from prediction markets, which let you bet on the likelihood of a SpaceX-Tesla merger at various points over the next 12 months. On Kalshi, the odds say there is just a 5% chance that the two companies will merge by the first of August. This makes sense, since it would likely not be immediately after the IPO.
However, when looking a year from now, Kalshi investors give it a 56% chance of a merger happening by May 1, 2027. That means SpaceX and Tesla are more likely than not to merge within the next 12 months, according to betting markets. Betting on an outcome is never a sure thing, but the wisdom of the crowds (in this case, bettors as a group) has been shown to be more accurate than not on average.
One corporate umbrella
Valuing these two businesses together would be tricky, and, of course, it depends on what the two stocks are valued at in a merger. But Musk never takes the boring route, and it's increasingly likely he will eventually put his endeavors under one corporate umbrella.
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
