Where Will Elon Musk Take SpaceX Next?

TradingKey - Elon Musk is considering how to consolidate his technology empire, as reports emerge that SpaceX is weighing a potential business integration with Tesla ( TSLA) or xAI.

According to people familiar with the matter, both integration plans are currently in the early stages of exploration, and no specific agreement has been reached yet.

As the news emerged, investors began evaluating various possible combinations of space, autonomous driving, and artificial intelligence businesses, attempting to determine which integration path holds the greatest strategic value.

SpaceX and xAI are more likely to merge first

Currently, the potential integration between SpaceX and the AI firm xAI shows clearer signs of progress, with negotiations appearing more grounded in feasibility and business synergy compared to the proposed merger between SpaceX and Tesla.

Analysts generally believe that a business integration between SpaceX and xAI is more strategically logical and realistic.

Industry analysis indicates that as the deployment of the Starlink satellite network accelerates, SpaceX's demand for data processing and computing power continues to rise, which xAI's artificial intelligence technology could perfectly complement. Integrating xAI into the SpaceX structure would not only help enhance its technical capabilities and operational efficiency but also allow the company to present a more forward-looking growth story to capital markets ahead of an initial public offering (IPO).

If the integration of SpaceX and xAI materializes, key assets including Musk's rocket business, the Starlink satellite internet service, the social media platform X, and the Grok AI chatbot would be brought under a single structure. This consolidation would fully link data, applications, and infrastructure, providing momentum for SpaceX’s "data centers in orbit" space computing strategy.

Against the backdrop of rapid AI evolution, this structural adjustment is of great significance for Musk in securing a strategic advantage in the competition against tech giants like Google, Meta, and OpenAI.

By contrast, a potential merger between SpaceX and Tesla currently remains more of a conceptual idea in capital markets. The discussion is primarily driven by certain investors rather than formal internal leaks or progress in negotiations, and the industry generally believes its likelihood is far lower than an integration with xAI.

If a merger with Tesla were chosen, Tesla, as a publicly traded company, could potentially use its market position and existing capital structure to absorb SpaceX, thereby rendering SpaceX’s plans for an independent IPO unnecessary.

From an investment perspective, combining the world’s most valuable automaker (Tesla) with the most valuable private aerospace company (SpaceX) might indeed appeal to large long-term institutional investors. However, such a cross-industry, cross-capital-structure integration would involve highly complex issues across multiple levels, including regulatory approval, valuation coordination, and the unification of governance structures.

Since Tesla is a public company while SpaceX remains privately held, any merger involving the two would trigger intense scrutiny from securities regulators and investment markets. This would bring about more stringent disclosure requirements, the restructuring of corporate governance, and the challenge of balancing shareholder interests.

According to the latest data from the prediction market platform Polymarket, as of Thursday evening, the probability of SpaceX and xAI merging by mid-year was estimated at 48%, while the predicted probability of a Tesla-xAI merger was only 16%.

Musk and His Business Empire

Elon Musk currently holds the position of the world's richest person, controlling several strategic technology companies including electric vehicle giant Tesla, aerospace company SpaceX, AI startup xAI (which also oversees the acquired social media platform X), neural interface company Neuralink, and the tunnel construction firm The Boring Company. His horizontal expansion across various industries continues to draw attention and speculation from capital markets.

Among these, Musk's SpaceX has become the world's most valuable private company. Based on a recent round of internal share transactions, its valuation has reached $800 billion.

SpaceX is expected to launch an IPO around June 2026, with a target valuation that could exceed $1.5 trillion. Notably, the timing of the listing may coincide with Musk's birthday, with the fundraising size projected to reach up to $50 billion, potentially setting a record for the largest IPO in history.

Since its founding in 2002, SpaceX has reshaped the global aerospace industry with its reusable Falcon rocket technology and laid the foundation for its rapidly expanding Starlink satellite network. Today, Starlink consists of thousands of orbiting satellites, providing low-Earth orbit internet services to multiple regions worldwide.

This is not the first time Musk has pushed for a strategic integration of his companies. As early as 2016, he used Tesla shares to acquire the solar power company SolarCity, completing a controversial yet forward-looking "energy integration" deal.

Last year, he once again pushed for a merger through alternative means, incorporating the social media platform X into xAI via a stock swap, thereby allowing the latter direct access to user data and distribution channels.

Over the years, speculation has persisted in the market that Musk will consolidate his corporate empire. Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and an investor in both Tesla and xAI, stated publicly that he sees such integration as a "predictable trend," candidly adding:

"It’s like a bunch of overvalued companies coming together, operated uniformly by Elon Musk. It might look messy, but it’s an opportunity for investors. If you want to invest in Musk, this merger lets you 'own the whole package' of his businesses. Actually, as an investment target, it becomes even more attractive."